Web Consultancy Business plan
EXECUTIVE SUMMARY
ConsultMe is an online portal (website) offering several services including web designing, consultation, social media marketing, SEO services and other such similar work. The website will be working from two small offices in Melbourne and Sydney while other three main offices working offshore in Dubai and India. The Web Design Services Industry has low level of market concentration where the industry is mostly dominated by the numerous small businesses and key players. In Australia, each player generates no more than 5.0% of the industry revenue which is primarily due to low barriers to entry.
Market concentration of the industry is expected to consolidate and remain stable rather than increasing over next few years. The industry is more likely to become less fragmented where the mid-sized companies will aim at gaining scale and acquiring the operations of smaller operators. 16% of the small businesses have high level of digital engagement and use internet for search engine optimization and search engine marketing. Of all the small businesses with high level of digital engagement, 9 out of 10 of the companies use SEO and display advertisements. The small businesses will be targeted by giving them opportunity to grow and market themselves through increased digital engagement.
ConsultMe will be outsourcing all of its marketing operations and programming operations into offshore offices in India and China. This will be done as it is felt that the Sopantech (Indian web application Development Company) will be able to effectively manage the programming and web application processes. While Milletech will be chosen as the marketing offshore company to carry out all the marketing related work of ConsultMe website. ConsultMe has decided to set the pricing based on competitor’s pricing. Penetration pricing will be used where a price just below the competitor’s price will be selected
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The company can fund its requirements through equity or debt. However, equity can dilute the ownership structure of the company, so it is decided to use debt as a prime source of fund. $90,000 will be obtained from ANZ band at 5.21% per annum which would mean that the total amount of $94,689 will be paid back by ConsultMe in one year time to the ANZ bank
Introduction
ConsultMe is an online portal (website) offering several services including web designing, consultation, social media marketing, SEO services and other such similar work. The website will be working from two small offices in Melbourne and Sydney while other three main offices working offshore in Dubai and India.
Market Feasibility
Web Services Industry:
The firms in the web designing services industry in Australia is based on provision of main activities that include web development, search engine optimization, graphic designing, integration, social media marketing and programming. However, the industry does not include the development of software applications (IBISworld, 2016). ConsultMe will be operating in the web designing services industry in Australia while offering services like SEO, marketing and other similar work.
Online Web Service Industry Trend:
The web designing services industry in Australia has been growing rapidly due to society’s increasing reliance on mobile web browsing activity and increased internet usage. The improved speed of internet and availability of unfettered GBs have caused a surge in website traffic significantly. These factors have prompted the online businesses to expand and improve their online presence and offer the various services related to internet including web designing and SEO services (IBISworld, 2016).
Online Web Services Industry Growth Rate:
Growth in the website traffic has jumped recently due to increasing use of smartphones and tablets for viewing the online content (IBISworld, 2016). This trend of smartphone users have pushed the demand growth for web designing services as clients need both desktop as well as mobile formats of their websites. According to recent Ibis World Report (2016), the industry revenue is predicted to grow at annual rate of 4.2% and touch $1.0 billion over the next five years through 2016-17.
Key Players and Market Concentration
The Web Design Services Industry has low level of market concentration where the industry is mostly dominated by the numerous small businesses and key players. In Australia, each player generates no more than 5.0% of the industry revenue which is primarily due to low barriers to entry (IBISworld, 2016). The industry is highly labor intensive which makes it difficult for the industry players to build scale from standpoint of production. Much of the economies of scale is extracted from carrying huge marketing campaigns and brand awareness efforts. There are around 3,108 online web design services businesses operating in Australia with total employees being around 9,381 (IBISworld, 2016).
Market concentration of the industry is expected to consolidate and remain stable rather than increasing over next few years. The industry is more likely to become less fragmented where the mid-sized companies will aim at gaining scale and acquiring the operations of smaller operators (IBISworld, 2016). Apart from other components of this industry, legal services, management consulting and marketing services are the ones that are heavily used by the users. The industry is mostly comprised of several small firms that are hiring less than 20 people and are working as sole owners of in partnerships. The whole industry incorporates 56,154 businesses with management consultants and advertising services holding around one fifth of the whole business (Innovation & Business Skills Australia, 2015).
Geographically, the services businesses are more concentrated in the capital cities with about more than two thirds being located in Victoria and New South Wales. However, 25% of the call centers business was concentrated in Queensland in 2014 that rose from 17% in 2011 (Innovation & Business Skills Australia, 2015). The communications and marketing sector of websites comprises of about 8,000 businesses in advertising area while 3,000 are in market research and consultancy services and 400 businesses are operating in public relations. Other segments are highlighted by brand development, logistics, SEOs, customer relations, positioning and digital engagement of businesses (Innovation & Business Skills Australia, 2015).
Target Market
ConsultMe will be targeting small businesses who are willing to get the services offered by ConsultMe.
Small business: As internet has become a backbone of businesses’ infrastructure, so companies use it to set up their homepages and describe their projects online. This allows them to get an excellent way of advertising their products. The graph below shows that most of the small businesses have digital presence, high usage of internet as well as digital marketing. According to Deloitte (2013), 16% of the small businesses have high level of digital engagement and use internet for search engine optimization and search engine marketing. Of all the small businesses with high level of digital engagement, 9 out of 10 of the companies use SEO and display advertisements (Delloite, 2013). The small businesses will be targeted by giving them opportunity to grow and market themselves through increased digital engagement. A 2012 survey by MYOB of small business concluded that the companies with website or online presence has more chances of getting more sales than their targeted three-month pipeline (Delloite, 2013).
The figures below show how small businesses have low, medium and high digital presence and it can be observed that most of the small businesses have presence on social networks, use digital marketing for promoting their products and use internet for reaching new customers. These small businesses will be the prime target market of ConsultMe as it will offer wide array of web services including search engine optimization to make their product first in search engines.
Technical Feasibility
ConsultMe will be outsourcing all of its marketing operations and programming operations into offshore offices in India and China. This will be done as it is felt that the Sopantech (Indian web application Development Company) will be able to effectively manage the programming and web application processes. While Milletech will be chosen as the marketing offshore company to carry out all the marketing related work of ConsultMe website. The company plans to form strategic alliances with Sopantech and Milletech to further refine the services offered by ConsultMe. The offshore companies will be paid 10% of the revenue after first year of operations. The services will be commission and percentage based.
Skills Required:
In order to formulate the business, required resources include worker’s skills, suppliers, capital requirement and other facilities needed to establish business. The most important resource required by ConsultMe is human resource with technical expertise in telecommunication engineering, search engine optimization, technical writing, surveying, and researching, programming and graphic designing. Other resources include the place for furniture, computer machinery, furniture and other utilities.
According to report by Australian Government Department of Employment (2015), there are large number of IT professionals available for hiring. On average, the employers tend to have an average of 5 suitable applicants to choose from for their vacancies. Employment trend for IT profession is expected to rise in future by 14.9% till November, 2020 (Australian Government, 2015). The labor market for IT professionals is large with almost 250,000 employed number of professionals (Australian Government, 2015). On the basis of this analysis, it can be considered that, ConsultMe will face no difficulty in hiring web developers, administrators, content engineers, designers, GUI programmers and web application developer.
Laws and Regulations
The web services industry is scrutinized under Australian Intellectual Property Rights laws covering patent protection, trade mark protection, registration of domain name, designing protection and copyright protection (Bolt, 2014). The copyright and trademark laws are strict and stringent in this industry as it prohibits using the designs or content of others. In case of copyright infringement or trademark infringement, a huge financial liability can occur and cause losses for the firm that hired the web designing team (Australian Government, 2016).
Financial Feasibility
Pricing
ConsultMe has decided to set the pricing based on competitor’s pricing. Penetration pricing will be used where a price just below the competitor’s price will be selected. Many of the web designers and service providers have different packages ranging between $250 per year to $600 per year (plus a setup fee that varies) (Site Fresh, 2016). Based on this analysis, ConsultMe will set its price at $200 per year for Gold packages, $150 per year for Silver Packages and Copper package will be sold at $100 per annum plus a different setup fee of at one time. The automatic upgradation and product enhancement features will not be affecting the price of any service provided by ConsultMe. Users will have three payment options as set below:
|
Package Name |
Duration |
Services |
Price |
|
Gold |
12 Months |
SEO, Website Designing and Graphic Designing Services. Package of 3 months social media marketing |
$200(p/a) + $300 startup cost |
|
Silver |
12 Months |
Website Designing, SEO |
$150(p/a) + $250 startup cost |
|
Copper |
12 Month |
SEO |
$100(p/a) + $200 startup cost |
The budgeted expenses statement and income statement is based on the following criteria:
- Hiring 10 IT professionals at different wage rates. The minimum wage per week is $673, so ConsultMe will give rate of $700 per week.
- Space rent of two offices at 70m2 with $400m2 p/a to be of $2,500
- Miscelleneous expense rising at 5% rate yearly
- Number of new small businesses growing at 10% per year
- Minimum number of small businesses hit are 1500.
- It is assumed that service packages will be sold in following ratio (2:1:1 as Gold: Silver: Copper) as half of the businesses will buy gold package while 1/4th will buy silver and 1/4th will buy copper package.
- 10% of revenue will be dedicated to marketing expenses
- 10% of revenue will be shared with offshore companies in India and China (5% each)
- 5% of revenue is dedicated to computer and phone expenses.
|
CONSULTME Web Services Budgeted Income Statement (Five Years) ($) |
|||||
|
Heads |
2016 |
2017 |
2018 |
2019 |
2020 |
|
Gold (Half) |
750 |
825 |
908 |
998 |
1,098 |
|
Silver (1/4th) |
375 |
413 |
454 |
499 |
549 |
|
Copper (1/4th) |
375 |
413 |
454 |
499 |
549 |
|
Total Packages |
1,500 |
1,650 |
1,815 |
1,997 |
2,196 |
|
Gold |
375,000 |
412,500 |
453,750 |
499,125 |
549,038 |
|
Silver |
150,000 |
165,000 |
181,500 |
199,650 |
219,615 |
|
Copper |
112,500 |
123,750 |
136,125 |
149,738 |
164,711 |
|
Total Revenue |
637,500 |
701,250 |
771,375 |
848,513 |
933,364 |
|
Expenses |
|||||
|
IT Professionals ($700 per week for 54 weeks and 10 employees) |
378,000 |
378,000 |
378,000 |
378,000 |
378,000 |
|
Marketing |
63,750 |
70,125 |
77,138 |
84,851 |
93,336 |
|
Computer and Phones |
31,875 |
35,063 |
38,569 |
42,426 |
46,668 |
|
Office Space |
30,000 |
30,000 |
30,000 |
30,000 |
30,000 |
|
Commission to offshore Companies |
63,750 |
70,125 |
77,138 |
84,851 |
93,336 |
|
Total Expenses |
567,375 |
583,313 |
600,844 |
620,128 |
641,341 |
|
Profit |
70,125 |
117,938 |
170,531 |
228,384 |
292,023 |
The above graph shows the growth rate with which ConsultMe will be increasing its revenues. From first year to 2020, ConsultMe will have grown by more than 316%. This positive outlook of ConsultMe is due to its increasing number of anticipated sales that is expected to grow by 10% each year. The expenses graph below is also indicating a steady rise in expenses due to commissions being paid to offshore companies in India and China.
Startup Cost:
The startup cost that is given below is the snapshot of cost that will incur in initial or start of business. The required investment for the offices and running of Consult Me business in Melbourne and Sydney is given below:
|
Establishments |
Cost |
|
Deposit Rental of Two Offices ($2,500 each) |
$5,000 |
|
Bank Guarantee (first three months’ rent) |
$15,000 |
|
Desktop PC |
$1,320 |
|
Laptops (5 at $2000) |
$10,000 |
|
Electricity Deposit |
$3,000 |
|
Telephone Installation |
$1,000 |
|
Internet Access |
$190 |
|
IT Professionals |
$28,000 |
|
Miscellaneous Startup Cost |
$1,500 |
|
Total Startup |
$65,000 |
A total of $65,000 will be required for setting up the business, while $25,000 will be maintained as a buffer cost that can involve any fulfillment of legal obligations or requirements if required. So total fund needed is $90,000.
Financial Risk
ConsultMe recognizes that it is facing both market and industry risks. It belives that the risks are as follows and can be addressed with appropriate risk management strategy:
Startup Company: The Company is facing a risk for being a startup company. For quickly establishing a desired relationship with the small businesses, it is important to develop a good reputation first.
Security: Being a web services company, ConsultMe have to keep in mind the security of the data that it has been provided by the customers. The company can become liable for security flaws including data breaches. Security of designing services and other services is needed to remain at top priority and enough counter security tools must be intact to keep the customers’ data away from malicious cyber-attacks. It can cause bad reputation as well as legal claims by the customers resulting in huge financial losses.
Funding Options
The company can fund its requirements through equity or debt. However, equity can dilute the ownership structure of the company, so it is decided to use debt as a prime source of fund. $90,000 will be obtained from ANZ band at 5.21% per annum which would mean that the total amount of $94,689 will be paid back by ConsultMe in one year time to the ANZ bank (ANZ, 2016).
Human Resource
Technical Expertise
ConsultMe will hire ten professional IT experts each specialized in designing, programming, GUIs, interfaces, SEOs, writing and content engineering. These IT professionals will be responsible for fulfilling the requirements of the project shared by the client. The technical knowhow of Java, Oracle and WordPress will be preferred.
Roles and Ownership Structure
Mr. Robinhood Ferrel– President and CEO
Mr. Robinhood has over fifteen years’ experience in Information Technology industry. He, after graduating from Devry University of Technology, started working as a website content engineer in HP. He will retain 50% of the company’s shares.
Mr. Edward Rimmel – COO/CFO
Mr. Edward graduated from Harvard University with a degree in business management. He has a vast experience in technology industry as he has been working for BBC for several years. He will also retain 50% of the company’s shares.
IT Professionals
Other manpower required will be in form of IT Professionals with special skills in web programming, web designing, GUIs and web content development. They will be hired at fixed rate of $700 per week and will retain no share in company.
Growth Strategy
The company’s strategy for growth is to provide high quality services at lower rates to the small businesses so that many of them can become visible online. By offering services at reduced prices and in deals, small businesses can increase their sales and improve their financials as discussed above. The company expects to grow orders at 10% each year.
References
ANZ. (2016, February 29). FINANCE CONDITIONS OF USE: ANZ BUSINESS BANKING. Retrieved April 12, 2016, from https://www.anz.com/documents/business/commercialcard/BusFinConditionsUse.pdf
Australian Government. (2012, December). AUSTRALIAN SMALL BUSINESS: KEY STATISTICS AND ANALYSIS. Retrieved October 12, 2016, from Department of Industry Innovation, Science, Research and Tertiary Education: http://www.treasury.gov.au/~/media/Treasury/Publications%20and%20Media/Publications/2012/Australian%20Small%20Business%20-%20Key%20Statistics%20and%20Analysis/downloads/PDF/AustralianSmallBusinessKeyStatisticsAndAnalysis.ashx
Australian Government. (2015, December). Labour Market Research – Information Technology (IT) Professions. Retrieved October 12, 2016, from Department of Education: https://docs.employment.gov.au/system/files/doc/other/ausitprofessions_1.pdf
Australian Government. (2016). Australian Intellectual Property laws. Retrieved October 12, 2016, from https://www.austrade.gov.au/International/Invest/Guide-to-investing/Running-a-business/Understanding-Australian-business-regulation/Australian-Intellectual-Property-laws
Bolt. (2014, March 20). Risks of Operating a Web Design Firm. Retrieved October 12, 2016, from Insurance Agency: https://www.boltinsurance.com/risks-of-operating-a-web-design-firm/
Delloite. (2013). Connected Small Businesses: How Australian small businesses are growing in the digital economy. Retrieved October 12, 2016, from https://www.deloitteaccesseconomics.com.au/uploads/File/Connected%20Small%20Business.pdf
IBISworld. (2016, August). Web Design Services in Australia: Market Research Report. Retrieved October 12, 2016, from http://www.ibisworld.com.au/industry/web-design-services.html
Innovation & Business Skills Australia. (2015). Business Services Industry: Environment Scan 2015. Retrieved October 12, 2016, from https://www.ibsa.org.au/sites/default/files/media/IBSA%20Environment%20Scan%202015%20Business%20Services%20Industry.pdf
Kruizinga, H. (2014, September 23). An Incredible 35% of Australian Small Businesses Are Offline. Retrieved October 12, 2016, from https://www.crucial.com.au/blog/2014/09/23/an-incredible-35-of-australian-small-businesses-are-offline/
Site Fresh. (2016). ALL INCLUSIVE Web Design Packages. Retrieved October 12, 2016, from http://www.sitefreshwebdesign.com.au/
