Business Plan Original

8/6/2019 Business Plan Original

1/19

BUSINESS PLAN

For

DjibTech.PV.LTD

JUIN 2011

Submitted by:

y Mohamed Omar

y LibanMahamoud


2/19

Executive Summary

DjibTech is a one-stop shop for IBM-compatible computer users. We are located in the center ofeinguela-city. Our location is a major asset, as it is accessible to both the largest concentration ofthe local community. We will offer a wide selection of latest-technology computer hardware,

custom-built computer systems, computer service, and computer rentals by the hour andnetworking services. We are dedicated to providing consistently high client satisfaction byrendering excellent service, carrying items that are not locally available, and furnishing a warm,pleasant atmosphere at a competitive price. Our work environment will be one of respect for ourclients and our community.

The timing is right for starting this new venture. Our target area is the North and South districtsof Djibouti. Presently, there is only one other computer store in these districts that handles IBM-compatible computers, and that store focuses primarily on computer service, not hardware sales.We have polled the local community and have received an overwhelming response that there is adefinite need for a more comprehensive resource for computer sales and service in our target

area. We will offer solutions to the community not provided by any of our competitors. Withover 13 years of experience in the computer industry, information industry, management andretail, Ali and Amin have the skills necessary to make this venture extremely successful andprofitable.

To achieve our objectives, Djibtech is seeking a start-up loan. This loan will be paid back fromthe cash flow of the business within ten years, collateralized by the assets of the company,backed by personal integrity, experience, and a contractual guarantee from the owners. This loanwill be used to purchase inventory, increase working capital, and assist in start-up costs.

1.1 Objectives

The objectives for Djibtech are outlined below:

1. To create a service-based company whose goal is to exceed customer's expectations2. Sales increase to over a quarter-million dollars by end of second year and increase

modestly in the third year.3. To increase the number of customers serviced by at least 20% per year through superior

performance and word-of mouth referrals.4. Have a customer return rate of 90% by end of first year.5. Become an established community destination by end of first year.

1.2 Mission

To provide to the community with quality brand-name products, computer andnetworking solutions, reliable and professional technical support, and unparalleled customerservice and to earn a fair profit for our employee-owners and stakeholders by embracing sound,ethical business practices.


3/19

1.3 Keys to Success

The keys to success in our business are:

y Superior Customer Service: provide reliable, high-quality service and products, and an

expedient turn-around time on repairs.y Environment: provide a clean, friendly, and comfortable environment conducive to

giving professional trusting service.y Convenience: offering clients a wide selection of computer products and services in one

environment; including custom-built computers, computer diagnosis and repair,networking, and in-store computer stations where clients can buy time to browse theInternet, check e-mail, and download their digital photos from their camera memorycards onto discs.

y Location: provide an easily accessible location for customer convenience.y Reputation: credibility, integrity, and 100% dedication from 13+ years of experience in

the computer industry.

Company Summary

DjibTech will sell and service IBM-compatible computers to the local community. It will alsooffer custom-built computers, networking solutions, and in-store computer stationswhere customers can buy time to browse the Internet, check e-mail, and download their digital photos from their camera memory cards onto discs. What will set Djibtech apart from thecompetition is providing our customers all this in one convenient location, our dedication toexcellent customer service, and an expedient turn-around time on repairs.

2.1 Company Ownership

DjibTech will be created as an Djibouti Limited Company (LLC) based in Djibouti Country, andprivately co-owned by Ali and Amin. Ali has 13 years experience in the computer industry. Hewas co-owner of DjibTech in Dubai until he moved out of Dubai to live in Djibouti. Ali is acomputer technician and also has many years of management and retail experience.

Amin has 5 years of experience in the information technology industry. He was most recentlyemployed by Djibtelcom Communications, which is a nationwide provider of DSL service (highspeed Internet access). Amin also has management experience and extensive retail experience.


4/19

2.2 Start-up Summary

The start-up costs are to be financed by the direct owner investment. The cost, expense, andinvestment details are included in the following tables and chart.

Start-up Funding

Start-up Expenses to Fund $7,975

Start-up Assets to Fund $12,025

Total Funding Required $20,000

Assets

Non-cash Assets from Start-up $10,000

Cash Requirements from Start-up $2,025

Additional Cash Raised $0Cash Balance on Starting Date $2,025

Total Assets $12,025

Liabilities and Capital

Liabilities

Current Borrowing $0

Long-term Liabilities $0

Accounts Payable (Outstanding Bills) $0

Other Current Liabilities (interest-free) $0

Total Liabilities $0

Capital

Planned Investment

Jim & Judy Johnson $20,000

Investor 2 $0

Other $0

Additional Investment Requirement $0

Total Planned Investment $20,000

Loss at Start-up (Start-up Expenses) ($7,975)

Total Capital $12,025

Total Capital and Liabilities $12,025

Total Funding $20,000


5/19

Start-up Expenses

Business License & Legal $1,200

Stationery etc. $100

Brochures $25

Insurance $150

Rent $0

Rental Deposit $1,300

Research and Development $0

Expensed Equipment $0

Display Shelving * $500

Display for Custom-built Systems $400

Display Cabinet * $450

Main Store Sign $75

Store Signs for Windows $125

Installed Security System $1,200

Storage Shelving for Inventory $50

Workstations (4) $200

Workstation Monitors (4) $400

2 Additional Circuits for 4 TotalOutlets $600

Carpet $1,100

Painting $100

Other $0

Total Start-up Expenses $7,975

Start-up Assets

Cash Required $2,025

Start-up Inventory $10,000

Other Current Assets $0

Long-term Assets $0

Total Assets $12,025

Total Requirements $20


6/19

Products and Services

Most people today use computers either at work or at home. It is important that people have aquality resource for buying and servicing those computers. DjibTech will provide the localcommunity with just such a quality resource - a one-stop shop for IBM-compatible computers.

DjibTech will offer the following products and services with excellent customer service in afriendly, professional, and pleasant environment:

y Ready-to-Sell Computers - We will sell new and used computer systems in variousprice ranges that are already built and ready to be used.

y Custom-Built Computers - We will build and sell computer systems that are custom-designed according to the customer's preferences.

y Service and Repairs -We will do full-service computer diagnosis and repairs with anemphasis on quality work within an expedient turn-around time.

y Upgrades - We will offer customers the latest technology available to upgrade thecomputers they already own.

y Networking - We will offer full networking solutions for both home and office,including wireless networking.

y ComputerRental Stations - We will have work-stations set up where customers canbrowse the Internet, check e-mail, and download their digital photos from their cameramemory cards onto discs. These stations will be rented by the hour, but with no minimumtime requirement. This will be useful to both tourists and the local community.

Market Analysis Summary

DjibTech will focus on markets on the West side of Djibouti, including consumers, smallbusinesses and home offices (less than 10 employees), and tourists (mainly with the ComputerRental Stations).

4.1 Market Segmentation

Our market segmentation focuses:

y on residents,

y small businesses,

y And tourists of Djibouti.

However, the tourist market segment has very different needs, so the income potential is vastlydifferent than the other two market segments. The income potential analysis is as follows:

Though the numbers in our market segmentation scheme show that the tourist segment makes upthe largest portion of potential customers, they do not actually represent the largest income potential. The average tourist is in Obock for about a week and will not be in the market to


7/19

purchase a computer or have one repaired. However, many tourists want to be able to access theInternet and check their e-mail. We will satisfy this need with our Computer Rental Stations.Tourists will be able to rent time at a Computer Rental Station to browse the Internet, check e-mail, and download their digital photos from their camera memory cards onto discs. The fees wewill charge to rent the Stations will be modest, but since there will be no actual product leaving

the store for this service, the rental fees are straight profit. We expect these Rental Stations togenerate approximately 10% of the business' profit, so the income from the tourist marketsegment is actually 10%.

In terms of income potential, the largest market segment is actually the local consumers. Thissegment is represented in the market segmentation scheme under the heading "ResidentHouseholds". According to the official website for the state of Djibouti, in 2009, 52.4% ofDjibouti households had computers. In fact, many households have more than one computer.Consumers need a place to repair and upgrade the computers they already have as well aspurchase new computers and parts with the latest technology. Currently, the local residents havevery limited resources for purchasing computers or parts.

The remaining 40% of our business income will be generated by the small business marketsegment. 55% of the businesses in Djibouti are small businesses with less than 10 employees.These small businesses are large enough to need the high-quality computer technology we offer,but too small to have a separate computer management staff.


8/19

Market Analysis

Year 1 Year 2 Year 3 Year 4 Year 5

Potential Customers Growth

Resident Households 2% 56,243 57,396 58,573 59,774 60,999

Small Businesses 2% 2,956 3,017 3,079 3,142 3,206

Tourists 2% 1,035,682 1,056,913 1,078,580 1,100,6911,123,255

Total 2.05% 1,094,881 1,117,326 1,140,232 1,163,6071,187,460

4.2 Target Market Segment Strategy

Analysis of our market segmentation shows that 90% of our income will be generated by local

consumers and small businesses, with the remaining 10% being generated by tourists.Advertising strategy to the local market segments will differ from advertising strategy to thetourism segment in the following ways:

Advertising to Local Consumers and Small Businesses:

y Yellow Pagesy Local newspapersy Radioy Internet website

4.3 Service Business Analysis

DjibTech is part of the retail computer industry, which includes several types of businesses:

1. Chain Stores and Computer Superstores: these include major chains such asCompDjib, Best Buy, Sam's Club, Abdul, etc. They are almost always more than 10,000square feet of space, and are often warehouse-like locations where people go to findproducts in boxes. They usually offer a wide selection of software as well as thehardware. When purchasing computer systems, customers chose from various as-iscomputer systems, often without the option to alter the system components. Theirproducts are usually aggressively priced, but little or no support is provided. If they do

offer computer repair service, the turn-around time is often lengthy.2. Small Computer Dealers: storefront computer retailers, usually less than 5,000 square

feet. These computer stores are usually privately owned and often owner-operated.Because they are privately owned, the quality of products and service varies greatly fromone store to another. They usually focus on a few main brands of hardware, offer aminimum of software, and usually offer some level of service and support. A well runstore will offer top-quality products and competent, timely support and repair service;whereas, a poorly run store will provide little or no support and carry products chosen


9/19

mainly for their low price point, not quality or reliability. As with quality and service, theprices at these small stores vary between one store and another. Some small stores make apoint to compete with the prices of the large chain stores and superstores, and some donot. Small stores have the advantage of a one-on-one relationship between the customerand the sales person, which often results in more personalized service and products that

are better matched to the individual customer's needs.3. Internet/Mail order: mail order businesses from which customers purchase hardwareover the phone or Internet, including components and whole computer systems. Theytypically offer boxed products that are aggressively priced, but usually offer no service orsupport. This is a viable option for the purely price-driven buyer, who buys boxes andexpects no service. There is, of course, always a time delay between purchasing theproducts and receiving them due to shipping time, and often, the customer has to pay theshipping charges. Also, there is no opportunity for the customer to do a hands-oninspection before a product is purchased.

The computer industry has a greater influence on our society all the time. Most people use

computers either at work or at home. As the general public becomes more computer savvy, itplaces a greater value on quality resources to meet their computer needs.

4.3.1 Competitionand Buying Patterns

Consumers and small business buyers understand the concept of service and support, and aremuch more likely to pay for it when the offering is clearly stated.

There is no doubt that we compete much more against all the box pushers than against otherservice providers. We need to effectively compete against the idea that businesses should buycomputers as plug-in appliances that don't need ongoing service, support, and training.

Research indicates that our target consumers and small businesses think about price but wouldbuy based on quality service if the offering were properly presented. They think about pricebecause that's all they ever see. We have very good indications that many would rather pay 10-20% more for a relationship with a long-term vendor providing back-up and quality service andsupport; they end up in the box-pusher channels because they aren't aware of the alternatives.

Availability is also very important. Consumers and small business buyers tend to wantimmediate, local solutions to problems.

Strategy and Implementation Summary

Our target market consists of consumers, small businesses and home offices (less than 10employees), and tourists. Our sales and marketing strategy will consist of offering a wideselection of quality products and services, a friendly pleasant atmosphere, and a convenientlocation in the center of Obock with accessibility to locals and tourists alike. We will establishourselves in the community through word-of-mouth referrals from our satisfied clients, andvarious forms of advertising.


10/19

5.1 Competitive Edge

Our competitive edge is a combination of our wide range of products and services, outstanding

location, and our interaction with our clients. By building a business based on long-standingrelationships with satisfied clients, we simultaneously build defenses against competition. Thelonger the relationship stands, the more we help our clients understand what we offer them andwhy they should both stay with Djibtech , and refer us to others in the community. In close-knitcommunities like the Big Island of Djibouti, reputation is extremely important, and word-of-mouth advertising is invaluable.

5.2 Marketing Strategy

Our marketing strategy is a simple one: satisfied customers are our best marketing tool. The firsttime a customer comes to Djibtech, they will know that they have found a one-stop shop for all

of their computer needs, including a friendly personal atmosphere with exceptional customerservice. We have talked with many friends and associates who are excited about our plans andare anxious to shop with us and use our services. Word of mouth and a good reputation are thebest marketing tools in a close-knit community such as ours.

In addition, we will have a website, do radio and newspaper advertising, distribute flyers to localbusinesses, and advertise in the Yellow Pages. These venues will help us become known as weestablish our business.

5.3 Sales Strategy

Our umbrella sales strategy is to sell Djibtech to the West Djibouti community as the bestresource for their computer needs, enhancing their lives with our quality, latest-technologyproducts, the convenience of our one-stop shop, affordable pricing and the reliable professionalservice we offer.

We will sell Djibtech through each employee's expertise, courtesy, and warmth, creating atrusting impression on all customers, and establishing loyalty and return visits. We will ensureeach visit to Djibtech is a professional and pleasant experience, so that customers can alwaysdepend on our brand of service when they arrive.

We expect to have a customer return rate of 90% at the end of the first year and for sales to

increase to over a quarter-million dollars by end of second year.

5.3.1 Sales Forecast

The important elements of the Sales Forecasts are shown in the chart and table below. Initialsales forecast indicate a healthy first year revenue increasing modestly but steadily in the secondand third year. These figures are based on revenue from three main areas:


11/19

1. Computer Sales - this includes sales of all hardware components. We estimate a 5%annual increase in this revenue area from new customer acquisition. The sales costs forcomputer hardware averages 70% of the final sales prices when the hardware is sold.Costs for wholesale computer hardware is expected to have a 2% annual increase.

2. Computer Service - revenue generated strictly from labor fees, so except for

payroll, there is no sales cost. We estimate a 10% annual increase in this revenuearea from repeat business as a result of customer loyalty.3. ComputerRental Stations - revenue generated from customers renting the computer

stations by the hour. We estimate a 3% annual increase to reflect the projected increase intourism to Obock. This revenue is all profit since it requires no cost for inventory and it isbasically self-service, so requires no labor hours.


12/19

Management Summary

The management philosophy of Djibtech is based on respect for each of our fellow employees,respect for every client, and individual responsibility. We believe in listening to our clients anddoing our best to embody their vision of a community-minded business dedicated to meeting alltheir computer needs. Our management team consists of the owners, who are experiencedentrepreneurs possessing a breadth of functional experience in computer technology, informationtechnology, management and retail. Both Amin and Ali will share the senior managementresponsibilities with Ahmed directing the sales, development, operations and production,and Iftin directing the finances and marketing.

We still need to find a networking specialist for our clients who require that service, but as theneed for that will be on a job-by-job basis, we will use an independent contractor. We alreadyknow of a couple of qualified candidates.

When the need arises to hire employees, we will hire only employees who demonstrate technicalaptitude and a dedication to excellent customer service. The organizational structure andpersonnel plan reflect our intentions to maintain an organization that is customer oriented andtechnologically proficient, while efficiently managing cost controls and productivity.

6.1 Personnel Plan

The Personnel Plan below reflects our projected need at opening, and carries through the secondyear. The need for any additional personnel is not anticipated before the third year.

Personnel Plan

Year 1 Year 2 Year 3

ALI $33,000 $36,000 $40,000

AMIN $16,500 $21,000 $25,000

Total People 2 2 2Total Payroll $49,500 $57,000 $65,000

.


13/19

Financial Plan

The following subtopics help present the financial plan for DjibTech.

7.1 Important Assumptions

The key underlying assumptions of our financial plan shown in the following general assumptiontable are:

y We assume access to the start-up funding necessary to provide adequate initialcapitalization and establish our company.

y We assume continued steady economic growth in Djibouti as predicted by Bank ofDjibouti, and other Djiboutian economists.

y We assume continued steady population growth of the West Djibouti community.y We assume continued steady increase in tourism to the Obock area as predicted by

the Department of Business, Economic Development and Tourism for the State ofDjibouti.

y We assume continued usage of IBM-compatible computers in the home and at work.

General Assumptions


Plan Month 1 2 3

Current Interest Rate 10.00% 10.00% 10.00%

Long-term Interest Rate 10.00% 10.00% 10.00%

Tax Rate 30.00% 30.00% 30.00%

Other 0 0 0

7.2 Break-even Analysis

For our break-even analysis, we assume running costs which include our full payroll, rent andutilities, and an estimation of other running costs.

We will monitor gross margins very closely, and maintain them at or above 50% by takingadvantage of all promotions and discounts offered by our manufacturers and by our higher-profitrevenue generators of computer service and Computer Rental Stations.

The chart shows what we need to sell per month to break even, according to these assumptions.This is about 6% of our projected sales for our first year.


14/19

Break-even Analysis

Monthly Revenue Break-even $12,868

Assumptions:

Average Percent Variable Cost 50%

Estimated Monthly Fixed Cost $6,447

7.3 Projected Profit and Loss

There are two important assumptions with our Projected Profit and Loss statement:

1. Our revenue is based on minimum estimated averages against highest expenseexpectations.

2. Our major expense of rent is fixed for the next three years.


15/19


16/19

Pro Forma Profit and Loss


Sales $219,550 $232,977 $247,333

Direct Cost of Sales $109,550 $111,741 $113,976

Other Costs of Goods $0 $0 $0

Total Cost of Sales $109,550 $111,741 $113,976

Gross Margin $110,000 $121,236 $133,357

Gross Margin % 50.10% 52.04% 53.92%

ExpensesPayroll $49,500 $57,000 $65,000

Sales and Marketing and Other Expenses $280 $280 $280

Depreciation $0 $0 $0

Rent $15,600 $15,600 $15,600

Utilities $3,600 $3,600 $3,600

Security Alarm System $360 $360 $360

Insurance $600 $600 $600

Payroll Taxes $7,425 $8,550 $9,750

Other $0 $0 $0Total Operating Expenses $77,365 $85,990 $95,190

Profit Before Interest and Taxes $32,635 $35,246 $38,167

EBITDA $32,635 $35,246 $38,167

Interest Expense $3,310 $2,974 $2,624

Taxes Incurred $8,797 $9,681 $10,663

Net Profit $20,527 $22,590 $24,880


17/19

Net Profit/Sales 9.35% 9.70% 10.06%

7.4 Projected Cash Flow

Our projected cash flow includes planned borrowing to increase our capital and thereby ensure a

positive cash balance while our business is becoming established. Though the cash flow isnegative on and off throughout the year, we will maintain a healthy cash balance, which steadilyincreases in both the second and third years.

Pro Forma Cash Flow


Cash Received

Cash from Operations

Cash Sales $219,550 $232,977 $247,333

Subtotal Cash from Operations $219,550 $232,977 $247,333

Additional Cash Received

Sales Tax, VAT, HST/GST Received $0 $0 $0

New Current Borrowing $0 $0 $0

New Other Liabilities (interest-free) $0 $0 $0

New Long-term Liabilities $35,000 $0 $0

Sales of Other Current Assets $0 $0 $0

Sales of Long-term Assets $0 $0 $0

New Investment Received $0 $0 $0

Subtotal Cash Received $254,550 $232,977 $247,333


18/19

Expenditures Year 1 Year 2 Year 3

Expenditures from Operations

Cash Spending $49,500 $57,000 $65,000

Bill Payments $136,766 $156,082 $157,370

Subtotal Spent on Operations $186,266 $213,082 $222,370Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out $0 $0 $0

Principal Repayment of CurrentBorrowing

$0 $0 $0

Other Liabilities Principal Repayment $0 $0 $0

Long-term Liabilities Principal Repayment $3,504 $3,504 $3,504

Purchase Other Current Assets $0 $0 $0

Purchase Long-term Assets $0 $0 $0

Dividends $0 $0 $0Subtotal Cash Spent $189,770 $216,586 $225,874

Net Cash Flow $64,780 $16,390 $21,460

Cash Balance $66,805 $83,195 $104,655

7.5 Projected Balance Sheet

Our Projected Balance Sheet shows we will not have any difficulty meeting our debt obligationsas long as our revenue projections are met.

Pro Forma Balance Sheet


Assets

Current Assets

Cash $66,805 $83,195 $104,655

Inventory $12,320 $12,566 $12,818

Other Current Assets $0 $0 $0

Total Current Assets $79,125 $95,762 $117,473Long-term Assets

Long-term Assets $0 $0 $0

Accumulated Depreciation $0 $0 $0

Total Long-term Assets $0 $0 $0

Total Assets $79,125 $95,762 $117,473


19/19

Liabilities and Capital Year 1 Year 2 Year 3

Current Liabilities

Accounts Payable $15,076 $12,627 $12,962

Current Borrowing $0 $0 $0

Other Current Liabilities $0 $0 $0

Subtotal Current Liabilities $15,076 $12,627 $12,962

Long-term Liabilities $31,496 $27,992 $24,488

Total Liabilities $46,572 $40,619 $37,450

Paid-in Capital $20,000 $20,000 $20,000

Retained Earnings ($7,975) $12,552 $35,142

Earnings $20,527 $22,590 $24,880

Total Capital $32,552 $55,142 $80,023

Total Liabilities and Capital $79,125 $95,762 $117,473

Net Worth $32,552 $55,142 $80,023

Business Plan Original

Documents

Transcript of Business Plan Original