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The mission at Johnson & Stepps Consulting will be to offer high-tech manufacturers a reliable, high quality alternative to in-house resources for business development, market development, and channel development on an international scale. A true alternative to in house resources offers a very high level of practical experience; know how, contacts, and confidentiality. Clients must know that working with Johnson & Stepps Consulting is a more professional, less risky way to develop new areas even than working completely in house with their own people. Johnson & Stepps Consulting must also be able to maintain financial balance, charging a high value for its services, and delivering an even higher value to its clients. Our initial focus will be development in the European and Latin American markets, or for European clients in the United States market. •Excellence in fulfilling the promise completely confidential, reliable, trustworthy expertise and information. •Developing visibility to generate new business leads. •Leveraging from a single pool of expertise into multiple revenue generation opportunities: retainer consulting, project consulting, market research, and market research published reports. The total projected start up expenses (including legal costs, logo design, stationery and related expenses) come to $73,000. Start up assets required include $3,000 in short term assets (office furniture, etc.) and $1,000,000 in initial cash to handle the first few months of consulting operations as sales and accounts receivable play through the cash flow. Johnson & Stepps consulting is a new company providing high-level expertise in international high-tech business development, channel development, distribution strategies, and marketing of high tech products. It will focus initially on providing two kinds of international triangles: •Providing United States clients with development for European and Latin American markets. •Developing a market for our European and Latin American clients. As it grows it will take on people and consulting work in related markets, such as the rest of Latin America, and the Far East, and similar markets. As it grows it will look for additional leverage by taking brokerage positions and representation positions to create percentage holdings in product results. The corporation will be based in San Francisco, owned by its principal investors and principal operators. Some services we will provide are expertise in channel distribution, channel development, and market development, sold and packaged in various ways that allow clients to choose their preferred relationship: these include retainer consulting relationships, project based consulting, relationship and alliance brokering, sales representation and market representation, project-based market research, published market research, and information forum events. The company locations and facilities will be established in the Silicon area of California, the heart of the U.S. high tech industry. We will offer our customers the expertise a high-technology company needs to develop new product distribution and new market segments in new markets. This can be taken as high-level retainer consulting, market research reports, or project-based consulting. 1. Retainer consulting: We represent a client company as an extension of its business development and market development functions. This begins with complete understanding of the client company's situation, objectives, and constraints. We then represent the client company quietly and confidentially, sifting through new market developments and new opportunities as is appropriate to the client, representing the client in initial talks with possible allies, vendors, and channels. 2. Project consulting: Proposed and billed on a per-project and per-milestone basis, project consulting offers a client company a way to harness our specific qualities and use our expertise to solve specific problems, develop and/or implement plans, develop specific information. 3. Market research: Group studies available to selected clients at $5,000 per unit. A group study is packaged and published, a complete study of a specific market, channel, or topic. Examples might be studies of developing consumer channels in Japan or Mexico, or implications of changing margins in software. 1. The most significant competition is no consulting at all, companies choosing to do business development and channel development and market research in-house. Their own managers do this on their own, as part of their regular business functions. Our key advantage in competition with in-house development is that managers are already overloaded with responsibilities; they don't have time for additional responsibilities in new market development or new channel development. Also, we can approach alliances, vendors, and channels on a confidential basis, gathering information and making initial contacts in ways that the corporate managers can't. 2. The high-level prestige management consulting: Name-brand management and consulting in specialty areas. 3. The third general kind of competitor is the international market research company. 4. The fourth kind of competition is the market-specific smaller house. 5. Sales representation, brokering, and deal catalysts are an ad-hoc business form that will be defined in detail by the specific nature of each individual case. Once the company is up and firmly established we will broaden the coverage by expanding into coverage of additional markets (e.g. all of Latin America, Far East, Western Europe) and additional product areas (e.g. telecommunications and technology integration). We are also studying the possibility of newsletter or electronic newsletter services, or perhaps special on-topic reports. We will be focusing on high-technology manufacturers of computer hardware and software, services, networking, who want to sell into markets in the United States, Europe, and Latin America. These are mostly larger companies, and occasionally medium-sized companies. Our most important group of potential customers is executives in larger corporations. These are marketing managers, general managers, and sales managers, sometimes charged with international focus and sometimes charged with market or even specific channel focus. They do not want to waste their time or risk their money looking for bargain information or questionable expertise. As they go into markets looking at new opportunities, they are very sensitive to risking their company's name and reputation. These consumers of high-tech manufacturing companies are the key customers for us. Customers Customers Growth rate ____________________________________________________ European High Tech 1,000 15% Latin America 250 35% Other 10,000 2% ____________________________________________________ Total 16,250 N/A. Strategy Summary: We will focus on three geographical markets, the United States, Europe, and Latin America, and in limited product segments: personal computers, software, networks, telecommunications, personal organizers, and technology integration products. The target customer is usually a manager in a larger corporation, and occasionally an owner or president of a medium- sized corporation in a high-growth period. Pricing Strategy: Our Consulting will be priced at the upper edge of what the market will bear, competing with the name brand consultants. The pricing fits with the general positioning of Triangle as high-level expertise. Consulting should be based on $5,000 per day for project consulting, $2,000 per day for market research, and $10,000 per month and up for retainer consulting. Market research reports should be priced at $5,000 per report, which will of course require that reports be very well planned, focused on very important topics very well presented. •Large manufacturer corporations: our most important market segment is the large manufacturer of high-technology products, such as Apple, Hewlett-Packard, IBM, Microsoft, Siemens, or Olivetti. These companies will be calling on us for development functions that are better spun off than managed in-house, and for market research, and for market forums. •Medium sized growth companies: particularly in software, multimedia, and some related high growth fields, we will be able to offer an attractive development alternative to the company that is management constrained and unable to address opportunities in new markets and new market segments. The consulting "industry" is pulverized and disorganized, thousands of smaller consulting organizations and individual consultants for every one of the few dozen well-known companies. Consulting is a disorganized industry, with participants ranging from major international name brand consultants to tens of thousands of individuals. One of our challenges will be establishing ourselves as a "real" consulting company, positioned as a relatively risk free corporate purchase. At the highest level are the few well-established major names in management consulting. Most of these are organized as partnerships established in major markets around the world, linked together by interconnecting directors and sharing the name and corporate wisdom. Some kinds of consulting are little more than contract expertise provided by somebody looking for a job and offering consulting services as a stopgap measure while looking. Consulting is sold and purchased mainly on a word-of-mouth basis, with relationships and previous experience being by far the most important factor. The major name-brand houses have locations in major cities and major markets, and executive-level managers or partners develop new business through industry associations, business associations, and chambers of commerce and industry, etc., even in some cases social associations such as country clubs. The medium-level houses are generally area-specific or function specific, and are not easily able to leverage their business through distribution. The key element in purchase decisions made at our client level is trust in the professional reputation and reliability of the consulting firm. A key to our survival will be how well we handle some of the identified strengths and weaknesses in the following areas. •The high-level prestige management consulting: Strengths: international locations managed by owner-partners with a high level of presentation and understanding of general business. Reputations can make the purchase of consulting an easy decision for a manager, despite the very high prices. Weaknesses: General business knowledge doesn't substitute for the specific market, channel, and distribution expertise we are focusing on in the high-technology markets. Also, fees are extremely expensive. •The international market research company: Strengths: International offices, specific market knowledge, permanent staff developing market research information on permanent basis, good relationships with potential client companies. Weaknesses: market numbers are not marketing, not channel development or market development. Although these companies compete for some of the business we are after, they cannot really offer the same level of business understanding at a high level. •Market specific or function-specific experts Strengths: expertise in market or functional areas. Weaknesses: the inability to spread beyond a specific focus, or to rise above a specific focus, to provide actual management expertise, experience, and wisdom beyond the specifics. The most significant competition is no consulting at all, companies choosing to do business development and channel development and market research in-house. Strengths: no incremental cost except travel; also, the general work is done by the people who are entirely responsible, the planning done by those who will implement. Weaknesses: most managers are terribly overburdened already, unable to find incremental resources in time and people to apply to incremental opportunities. Also, there is a lot of additional risk in market development and channel development done in house from the ground up. Finally, retainer-based antenna consultants can greatly enhance a company's reach and extend its position into conversations that might otherwise never could of taken place. 2001 2002 2003 __________________________________________________________________ Retainer Consulting $200,000 $250,000 $325,000 Project Consulting $270,000 $325,000 $350,000 Market Research $122,000 $150,000 $200,000 Strategic Reports $0 $50,000 $125,000 Other $0 $0 $0 Total Sales $592,000 $775,000 $1,000,000 Strategic Alliances: Given the background of prospective partners, we will be talking to European companies. In Latin America we would be looking at the key local high-technology vendors. Management Summary: As we grow we will take on additional consulting help, plus graphic/editorial, sales, and marketing. Organizational Structure: We will be managed by working partners. •From Europe our partner will be based in Paris. •From Latin America will come our other partner. •From America our partner will be based in the Silicon Valley at company headquarters. Our business requires a very high level of international experience and expertise. The initial personnel plan will involve 3 partners, 1 consultant, 1 strong editorial/graphic person with good staff support, 1 strong marketing person, an office manager, and a secretary. Later we may add more partners, consultants and sales staff. 2001 2002 2003 _________________________________________________________________________ Sales $592,000 $775,000 $1,000,000 Cost of Sales $159,000 $110,000 $151,000 Other $1,000 $0 $0 Total Cost of Sales $160,000 $110,000 $151,000 Gross margin $432,000 $665,000 $849,000 Gross margin percent 72.97% 85.81% 84.90% Advertising/Promotion 10.% $36,000 $40,000 Public Relations 10% $30,000 $30,000 Travel 10% $90,000 $60,000 Miscellaneous 10% $6,000 $7,000 Payroll expense $194,750 $377,000 $432,000 Leased Equipment $6,000 $7,000 $7,000 Utilities 20% $12,000 $14,000 Insurance 20% $3,600 $2,000 Depreciation $0 $0 $0 Rent 25% $18,000 $23,000 Payroll Burden $0 $0 $0 Contract/Consultants $0 $0 $0 Other $0 $0 $0 Total Operating Expenses $396,350 $560,000 $682,000 Profit Before Interest and Taxes $35,650 $105,000 $167,000 Interest Expense ST $3,600 $12,800 $12,800 Interest Expense LT $5,000 $5,000 $5,000 Taxes Incurred $0 $0 $0 Net Profit $27,050 $87,200 $149,200 2001 2002 2003 ____________________________________________________________________________________ Net Profit: $27,050 $87,200 $149,200 Depreciation $0 $0 $0 Change in Accounts Payable $49,413 $16,799 $13,764 Current Borrowing (repayment) $60,000 $100,000 $0 Increase (decrease) Other Liabilities $0 $0 $0 Long-term Borrowing (repayment) $50,000 $0 $0 Capital Input $0 $0 $0 Subtotal $186,463 $203,999 $162,964 Change in Accounts Receivable $94,000 $5,750 $50,500 Change in Inventory $0 $0 $0 Change in Other ST Assets $0 $0 $0 Capital Expenditure $0 $0 $0 Dividends $0 $0 $0 Subtotal $94,000 $5,750 $50,500 Net Cash Flow $92,463 $198,249 $112,464 Cash balance $117,463 $315,712 $428,176 ___________________________________________________________________________________ Accounts Payable $5,000 $54,413 $71,212 Short-term Notes $0 $60,000 $160,000 Other ST Liabilities $0 $0 $0 Subtotal Short-term Liabilities $5,000 $114,413 $231,212 Long-term Liabilities $0 $50,000 $50,000 Total Liabilities $5,000 $164,413 $281,212 Paid in Capital $50,000 $50,000 $50,000 Retained Earnings ($23,000) ($23,000) $4,050 Earnings $0 $27,050 $87,200 Total Equity $27,000 $54,050 $141,250 Total Debt and Equity $32,000 $218,463 $422,462 Net Worth $27,000 $54,050 $141,250 Bibliography: Word Count: 2309
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