Business Plan Graphic Design Company

Business Plan For A Graphic Design Company

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Table of Contents

1. Executive Summary Business Opportunity Product/Service Description

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2. Company Background Business Description Company History

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3. Business Plan For A Graphic Design Company

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4. Services

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5. The Industry, Competition, and Market Market Definition Primary Competitors Customer Profile

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6. Marketing Plan

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

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8. Conclusion

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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 ena bles 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 acce ss 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


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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.


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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.


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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.


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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.


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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.


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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


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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.


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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 succ ess 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 e ffects 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.


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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 o ffice 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 mo nitors 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.


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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.


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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 dev elopment 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.


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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.


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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.


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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.

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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


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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.

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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.

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

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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.

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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.

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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.

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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.


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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 tech nology 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.

Business Plan Graphic Design Company

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