Business Plan For A Graphic Design CompanyContact Information: 604 Harmony Lane New York, NY 10007 (212) 555-1234 This document contains confidential information. It is disclosed to you for informational purposes only. Its contents shall remain the property of Business Plan For A Graphic Design Company and shall be returned to Business Plan For A Graphic Design Company when requested. This is a business plan and does not imply an offering of securities. Table of Contents 1. Executive Summary Business Opportunity Product/Service Description 2. Company Background Business Description Company History 3. Business Plan For A Graphic Design Company 1 3 5 4. Services 6 5. The Industry, Competition, and Market Market Definition Primary Competitors Customer Profile 6. Marketing Plan 7 10 7. Financial Plan Investment Plan Break-even Analysis Liquidity Plan Earnings Plan Risk Analysis 8. Conclusion 12 19 Profits are from development and product sales. to establish joint ventures and strategic relationships with major firms and service providers. with the primary means of distribution transitioning from physical formats to digital formats accessed over the internet and wireless and cable networks.000. In order to offer an "end-to-end" person-to-person graphic exchange trading service. Through the company's online media platform. and to enter into arrangements with other e-commerce companies. The revenues of the first year are between $150.000 and 150. Executive Summary The company develops graphic design products for private and business customers.000. The company expects to enter into marketing agreements with certain consumer or retail companies and large e-commerce companies in order to market the digital graphics directly to consumers. it will provide consumers with access to graphic design products and software tools. It also provides a source for legal and free graphic products for private customers. The company intends to pursue a strategy aimed at delivering sustainable growth in earnings and company value. The platform also enables other members to distribute and promote their media products. The pricing policy provides unlimited downloads for all business members.000 and $250. 1. In addition.1 Business Opportunity The company expects that the picture and media industry is undergoing significant change. The company also plans to continue to pursue and expand relationships with leading distributors in each of the media product categories and in new product categories.and post-graphic development services to enhance the user experience. the company intends to offer a variety of pre. the company provide a platform for content owners to make their content available to consumers at five design stores with minimal effort on their behalf.Business Plan For A Graphic Design Company 1 1. The company intends to become a leading supplier of graphic design services and products over the internet. It is possible to download graphics from different categories. The goal of this start-up is the operation of a graphic design company. The expected number of customers is between 120. The key strategies of the company are to: increase the number of customers make strategic investments improve service and product quality . The company expects that the highly fragmented online media market and its anticipated growth provide an opportunity for expanding the company’s business and increasing its overall market share. The company plans to develop more than 500 graphic products per month. Sophisticated online search tools permit consumers to identify and purchase many previously inaccessible graphic products. It will also buy the exclusive rights for more than 1. . Figure 1.Business Plan For A Graphic Design Company 1.000 graphic products. The company generates revenues primarily through selling products and services. 2 The internet and mobile technology now make it economically feasible for graphic stores to make virtually an unlimited number of high-quality products available to consumers for purchase at any time.2 Product/Service Description The company intends to become a leading supplier of graphic design products and services as well as media and entertainment products over the internet.1 shows the distribution of revenues. payment processing. The company has a strong management team with significant experience in the online industry. the leisure and entertainment sector. Figure 2. 2. media content available without charge to users and generates revenue primarily through the sale of downloads. and technical personnel is intense as these employees are in limited supply. Company Background The internet offers for the first time the opportunity to create a global marketplace for digital graphic development and downloads. The company makes its basic properties like graphics. e-commerce and customer support.Business Plan For A Graphic Design Company 3 2. information technology. search engine. both domestically and internationally. and is characterized by rapid technological change. information.1 Business Description The company's performance is substantially dependent on the efforts and performance of its senior management. marketing. Competition for qualified sales. Additional advertising on the platform is sold through the company's internal advertising sales force and third-party agents. The company plans to have 20 employees in the first business year. .2 Company History The company was incorporated in 2004. The life cycles of the products and services are difficult to predict because the market for the products is new and emerging. changing customer needs and evolving industry standards. The future performance of the business depends on the successful and timely development. and the company might not be able to hire and retain sufficient numbers of such personnel to grow the business. introduction and market acceptance of new and enhanced products.1 shows the current distribution of labor costs for each segment. The company will also need to increase technical staff. The company develops graphics and provides several graphic design services. The fiscal year of this company is the calendar year and the duration of the company began in 2004 and is unlimited. media. The company begins commercial distribution of the services in the fourth quarter of 2006. 2. pictures. in order to increase market awareness and sales of services and products. The company plans to substantially expand the sales operations and marketing efforts. Business Plan For A Graphic Design Company 4 . Sophisticated online search tools permit consumers to identify and purchase many previously inaccessible graphic products. The internet and mobile technology now make it economically feasible for graphic stores to make virtually an unlimited number of high-quality products available to consumers for purchase at any time. Business Plan For A Graphic Design Company The company intends to become a leading supplier of graphic design products and services as well as media and entertainment products over the internet. . The company plans to develop more than 500 graphic products per month. It will also buy the exclusive rights for more than 1.000 graphic products.Business Plan For A Graphic Design Company 5 3. The company generates revenues primarily through selling products and services. The market in which the company competes is characterized by rapidly changing technology. . products or download formats and expanding the breadth and depth of services. This means that a core focus will be placed on the detection of new trends and the development of new services. This will increase revenues in the long run. introductions and enhancements and changing customer demands.Business Plan For A Graphic Design Company 6 4. evolving industry standards. The company also plans to enter into co-marketing and service agreements with certain internet. technology and distribution capabilities as well as marketing and cross-promotional opportunities. consumer and retail companies in order to offer new services for the customers and find new customers. Services In order to increase traffic to the company's web sites. the company seeks to enter into strategic relationships with business partners who offer similar content. The company plans to expand its operations by developing and promoting new and complementary services. frequent new service and product announcements. increase revenues and to extend the brand internationally. Market is defined as the market where the company plans to operate in the next four years. video. Of these households. consumers and businesses are increasingly demanding access to advanced digital media.Business Plan For A Graphic Design Company 7 5. allowing for basic applications such as e-mail and low bandwidth Internet access. and project that the digital picture segment will represent approximately 25% of all picture sales in 2010. Industry sources report that digital graphic design products increased to 6% of the total graphic market during the first half of 2006. The growth of the Internet. Distribution involves the domestic and international distribution. The Industry. for faster downloading of data. such as DSL. For 2005 a growth rate of 40% is expected with strong development in the third and fourth quarters. According to several research institutes. approximately 127 million were accessing the Internet through broadband connections. The major producers have leading industry positions based on the number of products that they release. Dial-up connections provide transmission rates of up to 56 Kbps. and Market A careful analysis of the market and competitive forces in this industry is a key element in assessing the business potential of the project. Production involves the development and physical production of pictures. Figure 5. 5. The major producers are generally part of large diversified corporations with production and distribution operations and established relationships with creative talent and others involved in the industry. communications and interactive broadband applications. while the majority continued to access the Internet through dial-up connections. Comparatively. Despite slowing global economic growth in general a lot of companies with an international focus and new services have experienced constant growth rates of more than 35%. there were over 273 million online households worldwide. ADSL or cable modems.1 Market Definition The graphic industry involves the production and distribution of graphic services and graphic products. most of the 127 million households accessing the Internet through broadband connections were utilizing first generation broadband.1 shows average growth figures in revenues of all available companies in the specified market during the past five years. Competition. the proliferation of advanced digital media and the advancement of communications infrastructure have fundamentally changed the way media products can be distributed and shared. in 2004. Today. posters and additional media products. . This analysis will provide marketing and sales data that are indispensable to optimally develop the business potential. 4 shows the size of businesses in this market segment. several mid-sized companies like this company. Figure 5. This includes .Business Plan For A Graphic Design Company 8 5. but nonetheless the company must constantly maintain the technology developments.3 Customer Profile The company markets and sells the products worldwide through a combination of its own internet platform and third-party internet provider to all kinds of customers. and a large number of relatively small independent companies. The company believes that the products and services are not easily substitutable with the products of the competitors due to the level of technology. 5.2 Primary Competitors The company currently faces measurable competition from other media production and internet distribution companies. Competition might come from the use of existing technologies and also from the development of new services. The local industry is comprised of a few large. To further examine the competitive environment it is necessary to define the players in that environment. well-known companies. Several new companies have emerged producing similar services. The numbers are based on average revenues of companies that run their business more than five years. Numbers are based on average revenues per customer of a particular group multiplied by the number of customers in the respective group. High-use. Numbers are based on the average income per customer and the number of customers per income group. Figure 5.Business Plan For A Graphic Design Company 9 private and business customers.3 shows revenues by yearly income of private persons.2 shows the demand for the described services. This gives total demand share per group. The figure shows revenues generated per income group. As can be seen customers in the middle income segment generate the highest revenues. generate relatively low revenue streams. such as students. . Figure 5. low-income groups. Marketing cooperation: The best way to find out who would make a good partner is to research the potential businesses in the industry. convert leads into sales. The company focuses on a comprehensive web marketing and classical marketing strategy designed to attract new customers. The figure can serve as a direction for the planning of a marketing and sales promotion strategy. It carefully tracks not only expenditures but also the ROI from each source. Direct marketing: The company uses direct marketing campaigns with e-mail and mailing lists as well as newsletters. In the start-up phase it is a central task of the marketing concept to establish a name recognition and its own trade mark. The company has the budget and strategy that allows it to use dozens of traffic providers to link to its core web site. Marketing Plan Effective marketing together with consistent promotion are the keys to success online. identifying cross-selling and education opportunities. . Several marketing and sales promotion strategies are available in the online industry. Figure 6. Print advertising: Newspaper advertising is an integral and desired part of the marketing strategy.1 shows different marketing elements and their use in marketing strategies as well as their estimated potential success factor. In addition. and maximize the revenue. the sales team is responsible for building internal and external awareness related to new product offerings. On the other hand. Since spreading costs of such mailings are very low this marketing element provides a useful and efficient tool. The strategy will include special offers with opening discounts for new customers. Print media advertising is a mass communication tool. selling the products and services. Later on. This strategy is expected to continue for one to two years. Sales promotion will be used for a limited time to increase the number of customers. The numbers are based on comparable businesses. This strategy will be used to increase the revenue per customer. Sales promotion: Sales promotion strategies have temporary effects only. acquiring data about customers and prospects will be time consuming and expensive. and assisting with product training. The sales team is responsible for identifying and qualifying new customers. the strategy will primarily be targeted to gain new customers and create customer loyalty of repeat customers. Printed advertisements will be used in national and international magazines to increase the number of customers.Business Plan For A Graphic Design Company 10 6. Online marketing: The internet is a complex medium and it offers tremendous scope for advertising and business promotion especially for online-based companies. The initial prices will be reduced by 50% for the first three months. Business Plan For A Graphic Design Company 11 . contracted product development. Besides a plan of the financial needs. liability. The company is exposed to fluctuations in interest rates. Research and development expenses consist primarily of personnel costs. which includes implementing a customer management and administration system at an estimated cost of $0.000. In accordance with the risk management strategy. business development and field operations personnel. The most important features of the financial plan and the financial strategy can be summarized by the following points. Financial Plan The financial plan is the key factor for the success of a business start-up. In addition. cost and revenue estimates vary. as well as occupancy expenses. traditional advertising and promotional expenses. Depending on the initial investment sum. Figure 7. this plan must insure that the business is always liquid and ultimately profitable. The company anticipates making capital expenditures in the ordinary course of business of approximately $1.5 million in the balance of 2007. Since the sales and earnings projections in the business plan are based on expectations. trademark licensing and sponsorship or carriage fees paid to affiliates. or probable forecasted transaction that is identified by management. the financial plan has to be revised and refined on a constant basis so that discrepancies can be uncovered and instantly solved. General and administrative expenses consist primarily of fees for professional services.000 to $300. Investors and banks will base their funding decision on the information given in this plan. Sales and marketing expenses also include commissions and related benefits for sales personnel and consultants. salaries and related benefits for administrative and executive staff. The inputs for this financial plan are based on other companies that serve as a group of comparable firms as well as the company's own estimates based on the planned business environment. it uses derivative instruments only for the purpose of managing risk associated with an asset. committed transaction. It actively monitors these fluctuations and uses different derivative instruments from time to time to manage the related risk. .1 shows the expected relationship of cost and revenues. general office expenses.Business Plan For A Graphic Design Company 12 7. cost of revenues include transaction fees paid to distribution partners. There will be further capital requirements in the following years. sales. Cost of revenues consists of the direct expenses associated with the image processing. Sales and marketing expenses consist primarily of salaries for marketing. The initial capital requirement is estimated to be $250. Revenue estimates are conservative and expense projections include a cushion for unforeseen contingencies.9 million. and Internet service provider fees. All figures are refined by statistical simulations. This is comparable to other businesses in the segment. The use of derivative instruments may result in short-term gains or losses and may increase volatility in earnings. The company anticipates that operating expenses generally will remain stable in line with revenue growth. Section 7. Section 7. Every additional sales dollar adds to profit and vice versa. The projection shows that the critical amount of revenues at which the business is profitable and how profit develops over time. This includes all investments necessary during the start-up phase. This plan is based on current cost and revenue estimates from Section 7. The risk analysis contains critical factors that may impact the financial numbers presented in this plan. Section 7.4 contains a long-term profit projection for the first four years of business. The plan also includes initial marketing and sales promotion expenses. Section 7.2.1 gives an investments schedule.1 Investment Plan The investment plan lists primary capital needs for the foundation and operation of the business.5 provides a risk analysis. The figures are based on comparable businesses.2 gives a break-even analysis that shows revenues at the break-even point.3 gives a liquidity plan. . Liquidity must always be positive. 7.Business Plan For A Graphic Design Company 13 The details of the financial plan are laid out in more detail as follows: Section 7. 000 after two to three years profits are expected to rise to $130.000 and variable costs are estimated at $500. fixed costs are expenses that do not vary with sales volume. The break-even point is the point at which revenues from sales cover total costs (fixed costs and variable costs rising with sales).000 to $200. These costs have to be paid regardless of sales. These estimates are realistic in this market segment and comparable to similar businesses. At an estimated revenue of about $1. In this case.000 and given total costs the business will begin to generate a profit.000. . At a sales revenue of $700. This represents a revenue margin of about 7%. Variable costs vary directly with the sales volume. the business loses liquidity and may become insolvent. This requires that a critical amount of revenues must be generated.900. If the break-even point is not achieved in the long run. Fixed costs of this business are estimated at $100.2 Break-even Analysis The break-even analysis shows how earnings rise as a function of sales. This analysis is important for the development of the liquidity plan and the pricing policy.000.Business Plan For A Graphic Design Company 14 7. 000 for every month. 7. Cash is constant at $1. Up to a sales volume of $3.000.3 Liquidity Plan The liquidity plan shows the amount of finances necessary to assure permanent liquidity of the complete business.Business Plan For A Graphic Design Company 15 Increasing sales volume will increase pre-tax earnings margins but this development reverses when administrative costs begin to rise sharply. Additionally the graph shows the amount of sales at which a marketing campaign can be run profitably.5%. .2 shows at which critical sales volume the business generates a profit. Figure 7.000 earnings margins rise to 9. The liquidity plan is based on four representative months of a typical business.5% after which the margin decreases to constant 8. This serves as a base for a business and pricing strategy. Revenue estimates and costs are simulated from a standard normal distribution. Business Plan For A Graphic Design Company 16 7. Revenue estimates are drawn from a normal distribution with a strong estimated growth rate. Figure 7.4 Earnings Plan The earnings plan shows the results from ordinary operations. . The plan is based on the first four years of business.3 shows net income. Global piracy is a significant threat to the media industry generally. Unauthorized copies and piracy have contributed to the decrease in the volume of legitimate sales of media products and have put pressure on the price of legitimate sales.Business Plan For A Graphic Design Company 17 7. develop new distribution channels. . broaden professional services and support and improve the operational and 2. Such potential factors are numbered according to the probability at which they can arise.5 Risk Analysis The risk analysis considers critical factors that may lead to a failure of the business concept. Data are drawn from surveys from 12 businesses with different services as well as revenue and cost structures. 1. The company plans to increase the operating expenses to expand the sales and marketing operations. which is subject to unauthorized consumer copying and widespread dissemination on the internet without an economic return. fund greater levels of research and development. Shown are the key factors that led to the failure only. The revenue comes from the sale of graphic design services and products over the internet and wireless and cable networks. Such factors can involve failures during the implementation phase as well as during operations. Such failures might also come from external shocks instead of operating deficiencies. as well as a temporary collapse in demand. Approximately 25% of businesses with insufficient demand go bankrupt. 8. This includes permanently low demand. innovative ideas and concentration on core businesses are an easy means for an entrant to gain a competitive edge. This is also important for the future development of the business. A change of the business process could result in increased expenses or delays in commercialization and therefore could delay revenues and adversely affect our future operating results. Insufficient demand and customer loyalty: This frequently leads to business failure. Behavior of Competition: Due to low entry barriers additional businesses can enter the market at low cost. Many of the competitors have similar products and services that have already been tested by the customers or are in development. which will help minimize the effects of demand fluctuations. academic institutions. Since the expected frequency of business demand during the start-up phase are still low. 6. and it may not generate nor sustain positive cash flows from operations in the future. 7. The future success of the company will also depend in large part on the ability to attract and retain highly qualified service and management personnel. the operating results may suffer. The company faces competition for personnel from other companies. 5. The company has never generated positive annual cash flow from the core operating activities. 3. government entities and other organizations.Business Plan For A Graphic Design Company financial systems. A better service concept. Often demand estimates were too optimistic at the outset. The market for internet-based graphic solutions is new and rapidly evolving. . Approximately 16% of insolvent businesses were driven out of the market by that competition. The company expects that it will continue to need intensive marketing and sales efforts to educate prospective customers and partners about the uses and benefits of the products and services. 18 4. 9. a critical success factor is to focus promotional effort so as to generate customer loyalty early on. The ability to generate sufficient cash flow will depend on the ability to successfully develop new services and to sell these services. If the revenues do not increase as quickly as these expenses. the company makes high quality products for a broad audience. The expected margin for one product is between 3% to 5%. Service is very important. The company intends to continue to devote significant resources to technology development in order to introduce new products. This is occurring as a result of the popularity and proliferation of personal computers and digital platforms. For distribution a professional platform with the newest technology is essential. The company plans to become a leading publisher in the field of graphic design and graphic production. Service and technology are factors that can earn a competitive edge. For a successful operation of a graphic design production company 4 factors are critical and central to the business strategy: Cost management is a critical success factor for businesses in industries where margins are low. . Based on the knowledge of the industry and the announced release schedules of the competitors. With world-class creative talent. a strong and experienced management team and advanced graphic. The expected costs for additional services activities are between 5% to 10%. with the primary means of graphic distribution transitioning from physical formats to digital formats accessed over the internet and wireless and cable networks. The number of graphic design templates has to be between 100 and 250 to meet the requirements of the customers.Business Plan For A Graphic Design Company 19 8. The company believes that acquisitions of complementary technologies may allow to expand the product offerings. This will secure customer loyalty and optimize profitability in a market that is very competitive. Conclusion The company expects that the graphic industry is undergoing significant change. This is the chance for new businesses with innovative ideas and new offerings to secure a large customer basis. picture and media production technology and techniques. The distribution is based on its own online platform. On the other hand the expected additional growth rates due to new services activities are between 8% and 12%. the company expects to have a good product portfolio.