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Business Plan For A Graphic Design Company

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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 1
Business Opportunity
Product/Service Description

2. Company Background 3
Business Description
Company History

3. Business Plan For A Graphic Design Company 5

4. Services 6

5. The Industry, Competition, and Market 7


Market Definition
Primary Competitors
Customer Profile

6. Marketing Plan 10

7. Financial Plan 12
Investment Plan
Break-even Analysis
Liquidity Plan
Earnings Plan
Risk Analysis

8. Conclusion 19
Business Plan For A Graphic Design Company 1

1. Executive Summary
The company develops graphic design products for private and business customers. It also
provides a source for legal and free graphic products for private customers. It is possible to
download graphics from different categories. The pricing policy provides unlimited
downloads for all business members. The platform also enables other members to distribute
and promote their media products.

Profits are from development and product sales. The revenues of the first year are between
$150,000 and $250,000.

The goal of this start-up is the operation of a graphic design company. The expected number
of customers is between 120,000 and 150,000.

1.1 Business Opportunity


The company expects that the picture and media industry is undergoing significant
change, with the primary means of distribution transitioning from physical formats to
digital formats accessed over the internet and wireless and cable networks.

The company intends to become a leading supplier of graphic design services and
products over the internet. 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, to establish joint ventures and strategic relationships with major firms
and service providers, and to enter into arrangements with other e-commerce companies.

Through the company's online media platform, it will provide consumers with access to
graphic design products and software tools. In addition, 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. In order to offer an "end-to-end" person-to-person graphic
exchange trading service, the company intends to offer a variety of pre- and post-graphic
development services to enhance the user experience.

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.

The company intends to pursue a strategy aimed at delivering sustainable growth in


earnings and company value. 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 key strategies of the
company are to:

increase the number of customers


make strategic investments
improve service and product quality
Business Plan For A Graphic Design Company 2

1.2 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. The company
generates revenues primarily through selling products and services.

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.

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. Sophisticated online search tools permit consumers to identify
and purchase many previously inaccessible graphic products.

Figure 1.1 shows the distribution of revenues.


Business Plan For A Graphic Design Company 3

2. Company Background
The internet offers for the first time the opportunity to create a global marketplace for digital
graphic development and downloads.

The company develops graphics and provides several graphic design services. The future
performance of the business depends on the successful and timely development, introduction
and market acceptance of new and enhanced products. The life cycles of the products and
services are difficult to predict because the market for the products is new and emerging, and
is characterized by rapid technological change, changing customer needs and evolving
industry standards.

The company makes its basic properties like graphics, pictures, information, search engine,
media content available without charge to users and generates revenue primarily through the
sale of downloads. Additional advertising on the platform is sold through the company's
internal advertising sales force and third-party agents.

2.1 Business Description


The company's performance is substantially dependent on the efforts and performance of
its senior management.

The company has a strong management team with significant experience in the online
industry, the leisure and entertainment sector, information technology, payment
processing, media, e-commerce and customer support.

2.2 Company History


The company was incorporated in 2004. The company begins commercial distribution of
the services in the fourth quarter of 2006.

The fiscal year of this company is the calendar year and the duration of the company
began in 2004 and is unlimited.

The company plans to have 20 employees in the first business year. Competition for
qualified sales, marketing, and technical personnel is intense as these employees are in
limited supply, and the company might not be able to hire and retain sufficient numbers
of such personnel to grow the business. The company plans to substantially expand the
sales operations and marketing efforts, both domestically and internationally, in order to
increase market awareness and sales of services and products. The company will also
need to increase technical staff.

Figure 2.1 shows the current distribution of labor costs for each segment.
Business Plan For A Graphic Design Company 4
Business Plan For A Graphic Design Company 5

3. 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 generates
revenues primarily through selling products and services.

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.

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. Sophisticated online search tools permit consumers to identify and
purchase many previously inaccessible graphic products.
Business Plan For A Graphic Design Company 6

4. Services
In order to increase traffic to the company's web sites, increase revenues and to extend the
brand internationally, the company seeks to enter into strategic relationships with business
partners who offer similar content, technology and distribution capabilities as well as
marketing and cross-promotional opportunities.

The market in which the company competes is characterized by rapidly changing technology,
evolving industry standards, frequent new service and product announcements, introductions
and enhancements and changing customer demands. This means that a core focus will be
placed on the detection of new trends and the development of new services.

The company plans to expand its operations by developing and promoting new and
complementary services, products or download formats and expanding the breadth and depth
of services. This will increase revenues in the long run.

The company also plans to enter into co-marketing and service agreements with certain
internet, consumer and retail companies in order to offer new services for the customers and
find new customers.
Business Plan For A Graphic Design Company 7

5. The Industry, Competition, 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. This analysis will provide marketing and sales
data that are indispensable to optimally develop the business potential. Market is defined as
the market where the company plans to operate in the next four years.

5.1 Market Definition


The graphic industry involves the production and distribution of graphic services and
graphic products. Production involves the development and physical production of
pictures, posters and additional media products. Distribution involves the domestic and
international distribution. The major producers have leading industry positions based on
the number of products that they release. 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.

The growth of the Internet, the proliferation of advanced digital media and the
advancement of communications infrastructure have fundamentally changed the way
media products can be distributed and shared. According to several research institutes, in
2004, there were over 273 million online households worldwide. Of these households,
approximately 127 million were accessing the Internet through broadband connections,
while the majority continued to access the Internet through dial-up connections. Dial-up
connections provide transmission rates of up to 56 Kbps, allowing for basic applications
such as e-mail and low bandwidth Internet access. Comparatively, most of the 127
million households accessing the Internet through broadband connections were utilizing
first generation broadband, such as DSL, ADSL or cable modems, for faster downloading
of data. Today, consumers and businesses are increasingly demanding access to advanced
digital media, video, communications and interactive broadband applications.

Industry sources report that digital graphic design products increased to 6% of the total
graphic market during the first half of 2006, and project that the digital picture segment
will represent approximately 25% of all picture sales in 2010.

Figure 5.1 shows average growth figures in revenues of all available companies in the
specified market during the past five years. 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%. For 2005 a growth rate of 40% is expected with
strong development in the third and fourth quarters.
Business Plan For A Graphic Design Company 8

5.2 Primary Competitors


The company currently faces measurable competition from other media production and
internet distribution companies. The local industry is comprised of a few large,
well-known companies, several mid-sized companies like this company, and a large
number of relatively small independent companies. Several new companies have
emerged producing similar services. Competition might come from the use of existing
technologies and also from the development of new services. To further examine the
competitive environment it is necessary to define the players in that environment. Figure
5.4 shows the size of businesses in this market segment. The numbers are based on
average revenues of companies that run their business more than five years.

The company believes that the products and services are not easily substitutable with the
products of the competitors due to the level of technology, but nonetheless the company
must constantly maintain the technology developments.

5.3 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. This includes
Business Plan For A Graphic Design Company 9

private and business customers. Figure 5.2 shows the demand for the described services.
Numbers are based on average revenues per customer of a particular group multiplied by
the number of customers in the respective group. This gives total demand share per
group.

Figure 5.3 shows revenues by yearly income of private persons. The figure shows
revenues generated per income group. Numbers are based on the average income per
customer and the number of customers per income group. As can be seen customers in
the middle income segment generate the highest revenues. High-use, low-income groups,
such as students, generate relatively low revenue streams.
Business Plan For A Graphic Design Company 10

6. Marketing Plan
Effective marketing together with consistent promotion are the keys to success online. The
company focuses on a comprehensive web marketing and classical marketing strategy
designed to attract new customers, convert leads into sales, and maximize the revenue. In the
start-up phase it is a central task of the marketing concept to establish a name recognition and
its own trade mark. Several marketing and sales promotion strategies are available in the
online industry. Figure 6.1 shows different marketing elements and their use in marketing
strategies as well as their estimated potential success factor. Later on, the strategy will
primarily be targeted to gain new customers and create customer loyalty of repeat customers.
The figure can serve as a direction for the planning of a marketing and sales promotion
strategy. The numbers are based on comparable businesses.

The sales team is responsible for identifying and qualifying new customers, selling the
products and services, identifying cross-selling and education opportunities, and assisting
with product training. In addition, the sales team is responsible for building internal and
external awareness related to new product offerings.

Online marketing: The internet is a complex medium and it offers tremendous scope for
advertising and business promotion especially for online-based companies. The company has
the budget and strategy that allows it to use dozens of traffic providers to link to its core web
site. It carefully tracks not only expenditures but also the ROI from each source.

Print advertising: Newspaper advertising is an integral and desired part of the marketing
strategy. Print media advertising is a mass communication tool. Printed advertisements will
be used in national and international magazines to increase the number of customers.

Marketing cooperation: The best way to find out who would make a good partner is to
research the potential businesses in the industry.

Sales promotion: Sales promotion strategies have temporary effects only. Sales promotion
will be used for a limited time to increase the number of customers. The strategy will include
special offers with opening discounts for new customers. The initial prices will be reduced
by 50% for the first three months. This strategy is expected to continue for one to two years.

Direct marketing: The company uses direct marketing campaigns with e-mail and mailing
lists as well as newsletters. This strategy will be used to increase the revenue per customer.
Since spreading costs of such mailings are very low this marketing element provides a useful
and efficient tool. On the other hand, acquiring data about customers and prospects will be
time consuming and expensive.
Business Plan For A Graphic Design Company 11
Business Plan For A Graphic Design Company 12

7. Financial Plan
The financial plan is the key factor for the success of a business start-up. Investors and banks
will base their funding decision on the information given in this plan. Besides a plan of the
financial needs, this plan must insure that the business is always liquid and ultimately
profitable. Since the sales and earnings projections in the business plan are based on
expectations, the financial plan has to be revised and refined on a constant basis so that
discrepancies can be uncovered and instantly solved. 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. Revenue estimates are
conservative and expense projections include a cushion for unforeseen contingencies. All
figures are refined by statistical simulations.

The most important features of the financial plan and the financial strategy can be
summarized by the following points.

Cost of revenues consists of the direct expenses associated with the image processing. In
addition, cost of revenues include transaction fees paid to distribution partners. Sales and
marketing expenses consist primarily of salaries for marketing, sales, business development
and field operations personnel. Sales and marketing expenses also include commissions and
related benefits for sales personnel and consultants, traditional advertising and promotional
expenses, trademark licensing and sponsorship or carriage fees paid to affiliates. General and
administrative expenses consist primarily of fees for professional services, general office
expenses, salaries and related benefits for administrative and executive staff, as well as
occupancy expenses. Research and development expenses consist primarily of personnel
costs, contracted product development, and Internet service provider fees.

The initial capital requirement is estimated to be $250,000 to $300,000. This is comparable


to other businesses in the segment. There will be further capital requirements in the
following years. The company anticipates making capital expenditures in the ordinary course
of business of approximately $1.5 million in the balance of 2007, which includes
implementing a customer management and administration system at an estimated cost of $0.9
million.

The company is exposed to fluctuations in interest rates. It actively monitors these


fluctuations and uses different derivative instruments from time to time to manage the related
risk. In accordance with the risk management strategy, it uses derivative instruments only for
the purpose of managing risk associated with an asset, liability, committed transaction, or
probable forecasted transaction that is identified by management. 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.

Depending on the initial investment sum, cost and revenue estimates vary. Figure 7.1 shows
the expected relationship of cost and revenues.
Business Plan For A Graphic Design Company 13

The details of the financial plan are laid out in more detail as follows:

Section 7.1 gives an investments schedule. This includes all investments necessary during the
start-up phase.

Section 7.2 gives a break-even analysis that shows revenues at the break-even point. Every
additional sales dollar adds to profit and vice versa.

Section 7.3 gives a liquidity plan. This plan is based on current cost and revenue estimates
from Section 7.2. Liquidity must always be positive.

Section 7.4 contains a long-term profit projection for the first four years of business. The
projection shows that the critical amount of revenues at which the business is profitable and
how profit develops over time.

Section 7.5 provides a risk analysis. The risk analysis contains critical factors that may
impact the financial numbers presented in this plan.

7.1 Investment Plan


The investment plan lists primary capital needs for the foundation and operation of the
business. The plan also includes initial marketing and sales promotion expenses. The
figures are based on comparable businesses.
Business Plan For A Graphic Design Company 14

7.2 Break-even Analysis


The break-even analysis shows how earnings rise as a function of sales. The break-even
point is the point at which revenues from sales cover total costs (fixed costs and variable
costs rising with sales). This analysis is important for the development of the liquidity
plan and the pricing policy. If the break-even point is not achieved in the long run, the
business loses liquidity and may become insolvent. This requires that a critical amount of
revenues must be generated.

At a sales revenue of $700,000 and given total costs the business will begin to generate a
profit. Fixed costs of this business are estimated at $100,000 to $200,000 and variable
costs are estimated at $500,000. In this case, fixed costs are expenses that do not vary
with sales volume. These costs have to be paid regardless of sales. Variable costs vary
directly with the sales volume.

At an estimated revenue of about $1,900,000 after two to three years profits are expected
to rise to $130,000. This represents a revenue margin of about 7%. These estimates are
realistic in this market segment and comparable to similar businesses.
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. Up to a sales volume of
$3,000,000 earnings margins rise to 9.5% after which the margin decreases to constant
8.5%.

Figure 7.2 shows at which critical sales volume the business generates a profit. This
serves as a base for a business and pricing strategy. Additionally the graph shows the
amount of sales at which a marketing campaign can be run profitably.

7.3 Liquidity Plan


The liquidity plan shows the amount of finances necessary to assure permanent liquidity
of the complete business. The liquidity plan is based on four representative months of a
typical business. Revenue estimates and costs are simulated from a standard normal
distribution. Cash is constant at $1,000 for every month.
Business Plan For A Graphic Design Company 16

7.4 Earnings Plan


The earnings plan shows the results from ordinary operations. The plan is based on the
first four years of business. Revenue estimates are drawn from a normal distribution with
a strong estimated growth rate. Figure 7.3 shows net income.
Business Plan For A Graphic Design Company 17

7.5 Risk Analysis


The risk analysis considers critical factors that may lead to a failure of the business
concept. Such factors can involve failures during the implementation phase as well as
during operations. Such potential factors are numbered according to the probability at
which they can arise. Shown are the key factors that led to the failure only. Data are
drawn from surveys from 12 businesses with different services as well as revenue and
cost structures.

1. The revenue comes from the sale of graphic design services and products over the
internet and wireless and cable networks, which is subject to unauthorized consumer
copying and widespread dissemination on the internet without an economic return.
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.

2. The company plans to increase the operating expenses to expand the sales and marketing
operations, develop new distribution channels, fund greater levels of research and
development, broaden professional services and support and improve the operational and
Business Plan For A Graphic Design Company 18

financial systems. If the revenues do not increase as quickly as these expenses, the
operating results may suffer.

3. The market for internet-based graphic solutions is new and rapidly evolving. 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.

4. 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.

5. Many of the competitors have similar products and services that have already been tested
by the customers or are in development.

6. 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 company faces
competition for personnel from other companies, academic institutions, government
entities and other organizations.

7. Behavior of Competition: Due to low entry barriers additional businesses can enter the
market at low cost. Approximately 16% of insolvent businesses were driven out of the
market by that competition. A better service concept, innovative ideas and concentration
on core businesses are an easy means for an entrant to gain a competitive edge.

8. The company has never generated positive annual cash flow from the core operating
activities, and it may not generate nor sustain positive cash flows from operations in the
future. The ability to generate sufficient cash flow will depend on the ability to
successfully develop new services and to sell these services.

9. Insufficient demand and customer loyalty: This frequently leads to business failure. This
includes permanently low demand, as well as a temporary collapse in demand. Often
demand estimates were too optimistic at the outset. Such failures might also come from
external shocks instead of operating deficiencies. Approximately 25% of businesses with
insufficient demand go bankrupt. Since the expected frequency of business demand
during the start-up phase are still low, a critical success factor is to focus promotional
effort so as to generate customer loyalty early on, which will help minimize the effects of
demand fluctuations. This is also important for the future development of the business.
Business Plan For A Graphic Design Company 19

8. Conclusion
The company expects that the graphic industry is undergoing significant change, with the
primary means of graphic distribution transitioning from physical formats to digital formats
accessed over the internet and wireless and cable networks. This is occurring as a result of
the popularity and proliferation of personal computers and digital platforms.

The company plans to become a leading publisher in the field of graphic design and graphic
production. With world-class creative talent, a strong and experienced management team and
advanced graphic, picture and media production technology and techniques, the company
makes high quality products for a broad audience. Based on the knowledge of the industry
and the announced release schedules of the competitors, the company expects to have a good
product portfolio.

For distribution a professional platform with the newest technology is essential. This is the
chance for new businesses with innovative ideas and new offerings to secure a large
customer basis. 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. The expected margin for one product is between 3% to 5%.

The company intends to continue to devote significant resources to technology development


in order to introduce new products.

The company believes that acquisitions of complementary technologies may allow to expand
the product offerings.

Service is very important. This will secure customer loyalty and optimize profitability in a
market that is very competitive. The expected costs for additional services activities are
between 5% to 10%. On the other hand the expected additional growth rates due to new
services activities are between 8% and 12%.

The distribution is based on its own online platform.

The number of graphic design templates has to be between 100 and 250 to meet the
requirements of the customers.

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