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FOCUS
Our focus is our customers’ focus
Executive Summary ...........................................................................................................3
The opportunity...............................................................................................................3
The difference ................................................................................................................3
Partnership......................................................................................................................3
Revenue sources .............................................................................................................3
The Team........................................................................................................................3
The Offering ...................................................................................................................4
1 Business Description.........................................................................................................5
1.1 The Entrepreneur environment .................................................................................5
1.2 Industry overview......................................................................................................6
1.3 Company Description................................................................................................7
1.4 Mission Statement .....................................................................................................7
1.5 Goals and Objectives.................................................................................................8
1.6 Critical Success Factors.............................................................................................8
2 Products and Services.......................................................................................................8
2.1 Products and Services Description.............................................................................8
2.1.1 Products and Services Description......................................................................8
2.1.2 Unique Features..................................................................................................9
2.1.3 New and Follow on Products and Services.........................................................9
3 The Market .......................................................................................................................9
3.1.1 Market Analysis .................................................................................................9
3.1.2 Competitor Analysis ........................................................................................10
4 Marketing Strategies and Sales.......................................................................................11
4.1.1 Introduction.......................................................................................................11
4.1.2 Pricing Strategy ................................................................................................11
4.1.3 Sales Strategy ...................................................................................................12
4.1.4 Sales Forecast ...................................................................................................12
5 Financials .......................................................................................................................13
5.1.1 Income Statement .............................................................................................14
5.1.2 Balance Sheet ...................................................................................................15
5.1.3 Cash Flow statement ........................................................................................16
5.1.4 Fund..................................................................................................................17
5.1.5 Valuation...........................................................................................................18
6 Appendices and references.............................................................................................19
6.1.1 Salaries Calculations Sheet .............................................................................19
6.1.1 Working Capital ...............................................................................................20
6.2 References................................................................................................................21
Executive Summary
The opportunity
Ministry of Information Technology in Egypt is leading aggressive projects to increase
export revenues for Egyptian IT services companies to achieve $280 million. More over
A.T Kearney estimated IT market size in GCC countries worth of $2 billion and growing
fast. According to the same survey, IT system integrators in the GCC countries are
looking forward to partner with Arab IT services partners who can run a cost effective
resource development and project delivery teams to support this demand.
The difference
- Different positioning and market penetration through partnering with system
integrators not competing with them.
- Proximity to the target markets through sales team in the region.
- Different project management and delivery model that is built on core teams
available on site and pool of professional offshore.
- Cost effective skill development and training models.
Partnership
Revenue sources
- Long term projects to focus on relation.
- Fast revenue source through outsourcing.
- Annual guaranteed revenue through support contracts.
- License and license referral revenues.
The Team
- All Focus management team members have 7+ years experience in GCC and 15+
years experience in ERP projects.
- CEO worked for IBM and Oracle for the last 15 years establishing partner
network on channel management capacity.
- Sales Director worked for Oracle and Raya in GCC, closing deals worth $10
millions.
- Operations director, an MBA and PMP professional who headed implementation
teams for 20+ ERP implementation projects in SAP and Oracle eBusiness Suite in
different business lines including government, banking and telecom.
The Offering
- Focus is raising $750,000 for its first round of financing and $500,000 in second
round. Focus projects a return of 60% IRR after 5 years of operations with 77%
share worth $13 millions.
-
1 Business Description
FOCUS Company will be founded to provide IT consulting services. With a Head
office in Cairo, Egypt and offices in Qatar, Kuwait and UAE, FOCUS will cover
GCC (Corporation Council for the Arab States of the Gulf) region.
FOCUS will be founded as a Limited Liability Company in Cairo.
Moreover, Egyptian government already put in place required laws and procedures to
promote Venture Capital business in Egypt.2
The mentioned strategies and actions encouraged both Ideavelopers
http://www.ideavelopers.com/ and Actis Capital LLP http://www.act.is/ to setup venture
capital and private equity organizations in Egypt.
1.2 Industry overview
The Market for IT services in GCC in 2007 exceeds $2 billion and is growing fast;
government is the largest segment comprising 20% to 25% on average.3
132
704
65
397
213 31
112 16 15 15
56 54 53
Highlights
- IT services comprises 25% to 30% of the total IT market size in the GCC
states overall.
- Government is a major spending on IT services through
o Centrally managed federal eGov initiatives
o Local ministry/agency level initiatives that are not always coordinated
centrally.
- Kuwait (15%) and UAE (11%) are projected to be the fastest growing IT
services markets; others will experience 5-10% growth (2006-2010).4
Non Government Spend
Government Spend
1.3 Company Description
Smart Village Cairo, Smart Village Cairo launched in 2003 as the first fully
operational Technology and Business Park in Egypt, accommodates Multinational
and Local Telecommunications and Information Technology Companies, Financial
Institutions and Banks, together with Governmental Authorities on three Million
square meters in the west of Cairo. The efficient mix of business services boosts the
competitiveness and profitability of enterprises taking advantage of Fiber Optic
Network, multi-source power supply, District cooling and Heating redundant network
plant. Evenly, organizations in Smart Village Cairo, profits from world class
standards amenities including Property Management & Maintenance, Event’s
Management, Transportation Services on 24/ 7 basis. Complementary Community &
Business Services are available in Smart Village Conference Hall, Smart Village
Club, Smart Nursery, Smart School, Postal and Parcel services, Travel Agency,
Signboards Production, Copy Center, Graphic and Printing Agency, plants & flowers
and First Aid Assistance and the upcoming Smart Village Business Hotel. Currently,
12,000 professionals run the operations of more than 100 Companies and expected to
reach 80,000 by the end of 2014. 5
Accordingly, the following services will be considered in first two to three years.
- Oracle eBusiness Suite Implementation Services with a focus on government
financials and human resources.
- IT enabling services including single sign-on, database installation services,
and Identity management implementations.
- Projects required training services for IT professionals and business users.
- Resources outsourcing.
3 The Market
3.1.1 Market Analysis
In 2007, IT companies working in Egypt and exporting IT services reported revenues
exceeding $190 million, with more than $75 million from export.
Vast majority of export revenues are generated in the GCC. 8
Total reported export revenues Geographies targeted
(28 firms responding) (32 firms responding)
KSA 20
Qatar 14
MENA &
Other(1) Egypt 11
14% UAE 10
MENA 9
USA/Europe Kuwait 8
18% KSA
Bahrain 5
47%
Kuwait USA/Europe 5
1% Rest Africa 5
Those market trends have been discussed with sales and channel management of Oracle s
in Egypt and GCC market as well as major local system integrators in GCC countries.
- Quality assurance
- Better Customer Relationship management
- Marketing plans
- Emphasize on project management
- Better value proposition
- High cost structure
- Small size causing inconsistency in quality of resources and inability to cope
with long life cycle government tendering and delivery process.
Number of Egyptian firms targeting
major verticals
Government 25
Financial Services 14
Education 9
Healthcare 8
Manufacturing 5
Retail 3
Given that both Qatar and UAE cost of living is around 20% more than KSA, Kuwait and
Bahrain, selling prices for UAE and Qatar will be set more than in other GCC countries.10
Average selling price for consulting man/day will be around $550 in 2008.
Accordingly the below table illustrates Best Case Scenario sales forecast.
The below table illustrates revenue forecast assuming Probable Case Scenario.
In both scenarios, license prices were calculated based on license prices for Oracle
Applications price lists.11
5 Financials 12
To following pro-forma financial statements were based on “Probable Case Scenario”
revenue forecast model and adopted a conservative approach in terms of operations
expenses, employee salaries and benefits and credit policy for receivables aging.
1,002,08
COST OF REVENUE 0 1,338,112 1,901,496 2,312,067 3,186,276
% of Revenues 101.0% 67.2% 58.4% 49.2% 46.6%
OPERATING EXPENSES
Sales & Marketing 211,840 372,806 528,789 704,025 866,630
Research & Development 59,920 79,903 132,569 297,013 368,315
General and Administration 171,587 297,386 336,526 422,279 529,782
Total Operating Expenses 443,347 750,095 997,884 1,423,318 1,764,727
% of Revenues 45% 38% 31% 30% 26%
EARNINGS BEFORE INTEREST & TAXES (498,427) (97,907) 357,560 965,887 1,880,511
ASSETS
CURRENT ASSETS
Cash 1,000,000 347,533 650,115 389,893 447,601 563,574
Accounts Receivable 275,181 472,895 1,815,000 3,135,000 5,280,000
Inventories 0 0 0 0 0
Other Current Assets 17,856 28,660 110,000 190,000 320,000
Total Current Assets 1,000,000 640,570 1,151,671 2,314,893 3,772,601 6,163,574
PROPERTY & EQUIPMENT 0 33,333 30,000 13,333 6,667 5,000
TOTAL ASSETS 1,000,000 673,903 1,181,671 2,328,226 3,779,268 6,168,574
STOCKHOLDERS' EQUITY
CommonStock 250,000 250,000 250,000 250,000 250,000 250,000
Preferred Stock 750,000 750,000 1,250,000 1,250,000 1,250,000 1,250,000
Retained Earnings (498,427) (596,334) (238,774) 436,268 1,564,574
Total Equity 1,000,000 501,573 903,666 1,261,226 1,936,268 3,064,574
TOTAL LIABILITIES & EQUITY 1,000,000 673,903 1,181,671 2,328,226 3,779,268 6,168,574
5.1.3 Cash Flow statement
Year 1 Year 2 Year 3 Year 4 Year 5
OPERATING ACTIVITIES
Net Earnings (498,427) (97,907) 357,560 675,042 1,128,307
Depreciation 16,667 23,333 26,667 11,667 6,667
Working Capital Changes
(Increase)/Decrease Accounts Receivable (275,181) (197,714) (1,342,105) (1,320,000) (2,145,000)
(Increase)/Decrease Inventories 0 0 0 0 0
(Increase)/Decrease Other Current Assets (17,856) (10,804) (81,340) (80,000) (130,000)
Increase/(Decrease) Accts Pay & Accrd Expenses 154,474 94,871 707,655 696,000 1,131,000
Increase/(Decrease) Other Current Liab 17,856 10,804 81,340 80,000 130,000
Net Cash Provided/(Used) by Operating Activities (602,467) (177,418) (250,223) 62,709 120,973
INVESTING ACTIVITIES
Property & Equipment (50,000) (20,000) (10,000) (5,000) (5,000)
Other
Net Cash Used in Investing Activities (50,000) (20,000) (10,000) (5,000) (5,000)
FINANCING ACTIVITIES
Increase/(Decrease) Short Term Debt 0 0 0 0 0
Increase/(Decrease) Curr. Portion LTD 0 0 0 0 0
Increase/(Decrease) Long Term Debt 0 0 0 0 0
Increase/(Decrease) Common Stock 0 0 0 0 0
Increase/(Decrease) Preferred Stock 0 500,000 0 0 0
Dividends Declared 0 0 0 0 0
Net Cash Provided / (Used) by Financing 0 500,000 0 0 0
Debt
Short Term Debt 0
Increase / (Decrease) Previous Period 0 0 0 0 0
Total Equity & Debt 1,000,000 1,000,000 1,500,000 1,500,000 1,500,000 1,500,000
Retained Earnings
Net Income (498,427) (97,907) 357,560 675,042 1,128,307
Dividends
Increase / (Decrease) Retained Earnings (498,427) (97,907) 357,560 675,042 1,128,307
Beginning Retained Earnings 0 (498,427) (596,334) (238,774) 436,268
Ending Retained Earnings (498,427) (596,334) (238,774) 436,268 1,564,574
5.1.5 Valuation
Assumptions
Month of IPO 60
Forecast annualized earnings at
IPO $1,128,307
P/E ratio at IPO 15
Calculations
Market Capitalization at IPO $16,924,598
First Second
Required FV for Investor at IPO $10,485,760 $1,687,500
Individual Investor's Share 62.0% 10.0%
Individual Investor's ROI 1049% 338%
Individual Investor's IRR 60% 50%
Accounts Receivable
% of Revenue 16.5% 16.5% 16.5% 16.5% 16.5%
Days Outstanding 59 59 59 59 59
Accounts Receivable 275,181 472,895 1,815,000 3,135,000 5,280,000
(Increase)/Decrease from Prev.
Period (275,181) (197,714) (1,342,105) (1,320,000) (2,145,000)
Inventory
% of Revenue 0.0% 0.0% 0.0% 0.0% 0.0%
Inventory Turns 0 0 0 0 0
Inventory Days 0 0 0 0 0
Inventory 0 0 0 0 0
(Increase)/Decrease from Prev.
Period 0 0 0 0 0