I-Tea Lounge Business Plan (Part 1)

Alex Vydrin

I got this plan from alltheinternetcafearehere Yahoo forum (seems to be dead now). Its owner gave me an consent to post it there. It has about 15 pages. So I divide it onto the 2 parts. Here is the first one: Part 1. Table of contents
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Introduction
Executive Summary
Description of Company and Business Concept
Description of the Service
Industry Analysis
Porters five forces
Actual competition
Presence of Close Substitutes
Market Analysis
Overall Market
Market Segment Targeted
Geographic Segmentation
Demographic Segmentation
Behavioral
Summary Results of Survey
Customer buying process
Entry Strategy
Competitor Analysis
Computer Smart Training
University of the Age
Competitive Advantages of UTA
I-Tea Lounge Competitive Advantages over UTA
Various Home Service Business


Table of contents

Introduction

Executive Summary

Description of Company and Business Concept

Description of the Service

Industry Analysis

Porters five forces

Actual competition

Presence of Close Substitutes

Market Analysis

Overall Market

Market Segment Targeted

Geographic Segmentation

Demographic Segmentation

Behavioral

Summary Results of Survey

Customer buying process

Entry Strategy

Competitor Analysis

Computer Smart Training

University of the Age

Competitive Advantages of UTA

I-Tea Lounge Competitive Advantages over UTA

Various Home Service Business

Operating plan

Geographic location

Computer Equipment Requirements

Management Team: Roles and Responsibilities

Risk Assessment

Financial summary

Summary of Key Financial Ratios

Profitability

Liquidity

Financial Leverage

Asset Utilization

Cash Flow

Break-even analysis



Introduction


I-Tea Lounge

Cnr Markeri St & Sunshine Bvd

Mermaid Waters.Qld 4223.

Principals


Derryk XXXXX Adrian xxxxxx

18/6 Xxxxxx Ave. 2727 Xxxxx Bird Lane.

Palm Beach.Qld 4221. Pensilvannia. QLD 4216.

Paul Xxxxxx Kris Xxxxx

56 Xxxxx ave. 15 Xxxxxx Tce.

Robina. 4226. Gaven. Qld 4211.

I-Tea Lounge will function as an Internet cafe with computer tuition courses. The primary source of income will be generated from tutorials. These courses will range from absolute beginners learning to turn on a computer, to advanced users. Our focus will be attracting senior citizens to our beginner courses. This income is supplemented by catering for general Internet access seekers between tutorials.

To open I-Tea Lounge, the principals require funds totaling $25 000 to purchase computer hardware and software. The funds will provide us with 14 new computers with software and network setup. Total start-up costs are $65 000. The remaining $40 000 is supplied by the 4 partners and is consumed by month 1-3 operating costs (rent etc) and the shop fit out.


Executive Summary


This document analyses the viability of establishing an Internet lounge, with computer tuition courses, in Mermaid Waters. The primary source of income is generated by two, two-hour tutorials (of up to 10 customers) each day. These courses will range from absolute beginners learning to turn on a computer, to advanced users wishing to master MS Office or Web design. The focus will be on attracting the lucrative forty-plus age group to our courses. This income is supplemented by catering for general Internet access seekers outside of tutorial times.

An excellent opportunity clearly exists to establish the I-Tea Lounge in the Mermaid Waters region. The closest competitors are 15 minutes drive away and the suburb has the highest percentage of people over forty on the Gold Coast. This information shows how convenient our location is for our target market compared to our competitors.

The marketing strategy focuses on providing a comfortable and inviting environment to allow our customers to relax and enjoy the training sessions. This is a key factor in attracting the target market. Our competitors ignore the specific needs of older citizens and focus on providing for a younger market. Qualities of service and personal attention are essential traits for marketing to older residents.

Research has shown senior citizens are a prime target market for this venture. A study by Microsoft shows 70% of people over the age of 50 want computer training but less then 10% have a PC at home. A competitor analysis also shows that only one competitor attempts to cater for the needs of senior citizens through a completely different style than we will be providing. I-Tea Lounge also will have employees from local businesses wanting to use the facilities during their lunch breaks.

I-Tea Lounge will achieve competitive advantages in many areas rather than banking on 1 or 2 niches. These include:

Our continual innovation in changing our courses to meet the changing needs of our customers.

Provide a convenient location with good general access and parking.

Create an environment of comfort for users so they enjoy the learning experience.

Tailor tutorial format and content to suit the needs and limitations of older citizens.

Implement a competitive pricing policy.

Provide an existing service to a new market segment with exceptional delivery.

The selected team is critical to the implementation of this plan. This team is constructed of the 4 partners. Derryk Xxxxx is the day to day operations manager whose daily duties include taking bookings. Adrian Xxxx coordinates marketing and course development. Paul Xxxx is responsible for computer system maintenance and troubleshooting. Kris Xxxx will handle the financial management of the venture.

The total net profits for the first three years of I-Tea Lounges operation have been projected at $141,883. This figure excludes budgeted drawings of $129,600. Taking these drawings into consideration and with an average yearly profit after budgeted drawings of $4,094.33, the businesses return on owners equity is healthy at 12%, 9.5% and 8.6% for years one, two and three respectively.

I-Tea Lounge will produce a positive cash flow in January 2003 or seven months after start up. No additional financing will be required to supplement the businesses cash requirements. The only external financing we seek is $25,000 for the purchase of computer equipment.





Description of Company and Business Concept


Entity Description


The I-Tea Lounge will be operated by a partnership of four people starting in mid 2002. The principals are listed on the introduction page. Part or the partnership agreement will include provision for equitable ways of dissolving the partnership. For more detailed information concerning the sharing of profits see accompanying notes to Appendix E. This business structure is projected to change after three to four years to a company once the business has established itself and the majority of the equipment has to be replaced.

Description of the Service


The primary service provided by I-Tea Lounge will be two-hour introductory tutorials on basic computing and use of software programs. As a supplement to this service, I-Tea Lounge will provide general Internet access charged at 15-minute intervals.

Service Features


Some of the key features include short and relaxed tutorials, a comfortable learning environment, high quality teaching and personal, friendly service. Our service will also be extremely up to date. Our computer equipment and software will be brand new. Our training courses will be adapted from the most recent and highest quality courses currently available to meet our customers needs.

The following is a list of the individual training courses we will offer:

- Computing Basics in a Windows Environment

- Basic Internet Surfing

- Advanced Internet Surfing and Searching

- Email

- Microsoft Word Beginning and Advanced

- Microsoft Excel Beginning and Advanced

- Microsoft Power Point

- Microsoft Access

Other potential courses offered in the future include family history research, online share trading and web page design. Pricing will be $10 per hour for general Internet usage, charged at 15-minute intervals and tutorials will be charged at $13 per hour or $26 for a two-hour tutorial. I-Tea Lounge will have its own regularly updated web-site that will be used to inform potential customers about the services we offer, opening hours and pricing.

In summary the service we provide will not be unique, the way we deliver it and the environment we deliver it in will be exceptional.


Industry Analysis


The I-Tea Lounge will be entering the IT training industry. This industry is currently in the growth phase. Both primary and secondary data used to gather market research points to an increasing trend that people over the age of 40 are seeking to learn how to operate and use the internet and the latest software available (refer to market research section).

Porters five forces


Porters five forces framework of competition outlines the determinants of long term industry profitability. The five forces are actual competition, threat of entry, presence of close substitutes, buyer power and power of suppliers.

Actual competition


The IT training industry on the Gold Coast is highly competitive. The I-Tea Lounge will be in direct competition with Computer Smart Training, the University of the Third Age, and various home service businesses (refer to competitor analysis and Appendix A). Once I-Tea Lounge has entered the market, it will be extremely important to not only attract customers from current industry incumbents but also new customers that are willing to participate in the training programs offered.

Threat of Entry


If I-Tea Lounge does become very successful and earns excess profits, then other entrepreneurs may see an opportunity to set up a similar business. This could have an adverse effect on the profitability of the I-Tea Lounge, as new businesses will be targeting the same market. The barriers to entry are minimal as initial investment would only be around $65000. Therefore I-Tea Lounge will strive to build an excellent reputation in the eyes of our customers, as this alone would act as a significant barrier to entry.

Buyer Power


Consumers will have the power in the industry that I-Tea Lounge operates. If consumers arent satisfied with the service offered, they can go elsewhere. I-Tea Lounge will practice relationship marketing with the customers to reduce the risk of loosing actual and potential customers.

Power of Suppliers


I-Tea Lounge will have the power over suppliers in the case of purchasing PCs and connecting to the Internet. This is due to the fact that fierce competition exits in the production of PCs and Internet connections.

Microsoft will have the power when it comes to purchase the necessary software because potential customers will want to learn how to use their products. Therefore I-Tea Lounge doesnt have the option to hunt for deals on software as Microsoft dictates the terms.

Presence of Close Substitutes


I-Tea Lounge realises that there are many close substitutes for the training service offered. Potential consumers could substitute the use of our service and purchase various books and CDs to teach themselves. Family and friends that know how to use Microsoft software can also act as a substitute and teach potential customers. Therefore I-Tea Lounge will endeavour to offer a first class service in a friendly environment to ensure that customers will return and not seek the use of the close substitutes.





Market Analysis


Overall Market


The overall market that has the potential to use I-Tea Lounges training service includes all residents and tourists that are lacking the necessary computer skills that is required in todays society.

Market Segment Targeted


The I-Tea Lounges market will be segmented in the following ways: geographically, demographically, psycho-graphic and behavioural.

Geographic Segmentation


I-Tea Lounge will be located in the Mermaid Waters area on the Gold Coast. Mermaid is a central location on the Coast, therefore will be targeting people over the age of 40, from the Gold Coast.

Demographic Segmentation


According to the latest ABS Report (June 2000) there were 157157 people over the age of forty living on the Gold Coast. This accounts for 45.12% of the population. I-Tea Lounge will be targeting both male and female people over the age of 40. Their income will be over $35000 and they will be either retirees or others wishing to increase their computer literacy to re-enter the workforce. They will have a limited education and only a small proportion will have completed high school.

An ABS report about Australian older people conducted in 1999 found 11.2% of people between the age of 55 to 64 have access to the Internet at home. As the Internet is a relatively new concept, this figure highlights the interest shown, regarding computers, from our target market. Also identified as an important demographic factor is the increasing trend of women using the Internet. A recent study by Neilsen Media Research found that from 1998 to 2000 the number of women over the age of 50 using the Internet increased by 50%.

Psycho-graphic Segmentation


Our target market will be looking to keep up with the times and not fall behind. Therefore there will be an increasing trend of these people looking to keep on top of new technologies that become available. But there will also be those that do not wish to be involved in the technological revolution and thus distance themselves.

Behavioral


We believe that potential customers will participate in the courses regularly. They will be seeking a quality service in a learning friendly environment. They will have a limited to knowledge of computers, but very eager to learn. Their loyalty status to I-Tea Lounge should be medium to high.

Summary Results of Survey


A sample of 40 people representative of our target market was used in the survey. The purpose of the survey was to determine whether or not the I-Tea Lounge would be able to establish client base and thus become a financially viable entity. Forty ladies were surveyed from the Probus Club on the Gold Coast and the remainder from the Mermaid Waters area.

We found that 10% of our target market had computers in their home but a massive 80% were interested in computers (See Appendix B). The survey also indicated that 20% of the people surveyed would be prepared to pay to learn how to use the Internet. This survey backs up the secondary data and indicates that a potentially lucrative market exists in training older people for using computers.

Customer Profile

< 40+

< Lower level of work force participation

< Stable disposable income

< High level of disposable time

Customer buying process


Need Recognition


< Wants to learn how to use the Internet to improve communication between family and friends that are overseas or interstate.

Pre-purchase search


< Looks through weekly papers, yellow pages and asks friends and family about various computer tutors

Evaluation of alternatives


< Compares the various companies to see if one suits needs

Purchase


< Attends first class

Post Purchases Evaluation

< Did I learn what I wanted to?

< Will I go back?

< Will I tell others of my experience?


Entry Strategy


Our target market is up of older residents and our advertising will focus on ways to reach that particular segment of the community through marketing and promotional strategies. Fliers will be delivered to the following places on a regular basis:

< The local geographical area, central Gold Coast

< Bowls clubs

< Sporting clubs

< Golf Courses

Also essential for any new business is a presence in the Yellow Pages. I-Tea Lounge will take out a 1/8-page advertisement. In addition to the Yellow Pages advertisement and the distribution of fliers, I-Tea Lounge will utilize the Gold Coast Sun newspaper for regular advertising.

Adverting for our secondary market will include some of the above-mentioned avenues such as newspapers, fliers and the Yellow Pages, but will mostly utilize the Internet in the following ways:

< Set-up our own domain (web site) introducing and promoting our new business. This will be the most important promotional tool.

< Purchase advertising space on popular and relevant web pages to promote our business and direct traffic to our site.

< Announce our presence using the newsgroups broadcast.

< Submit our web site to various search engines to increase our visibility

See Appendix D for the promotional budget that will state the amount spent and the timing of advertising activities throughout the year.


Competitor Analysis


Once I-Tea Lounge has entered the industry the main competitors will be Computer Smart Training, The University of the Third Age, various home service businesses and public libraries (refer to appendix C).

Computer Smart Training


Computer Smart Training (CST) is located on Chevron Island. Its target market consists of small business, corporations and individuals. CST offer one day intensive courses, at a cost of $215, on Microsoft word, excel, access and power point. They also offer a beginner course for email and the Internet. CST has an excellent reputation amongst small business and corporations on the Gold Coast. CST have trained employees from Movie World, Sea World and Ray White.

Although CST is not targeting the same market as I-Tea Lounge, competition between the two firms still exists. I-Tea Lounge will have the advantage over CST in that courses will be much shorter and customers will not be committed to undertake a whole days training. Our target market consists of the over 40 age group and they would rather learn in a more forgiving environment rather than an intense one. Therefore I-Tea Lounge has the possibility to lure the individual customers from CST as the courses will be shorter and will cost only $13 an hour rather than $215 per day.

University of the Age


The University of the Third Age (UTA) has its Coast office at Broadbeach on the Gold Coast. UTA will be I-Tea Lounges major competitor. They offer IT training and other courses to people over thee age of 55. A membership fee of $40 is required, however additional fees apply.

Competitive Advantages of UTA


excellent reputation

established customer base

cheap fees

I-Tea Lounge Competitive Advantages over UTA


Ability to offer superior service

Specializing only in IT training

Ability to be flexible

Latest technology

Marketing Strategy

Target market not limited to over 55

Various Home Service Business


There are around 12 home service businesses that train people at home. They service the entire Gold Coast area and charge anywhere between $15 and $30 dollars. Their competitive advantages are their ability to build good relationships with customers and their convenient home service. Their disadvantages relevant to I-Tea Lounge include: price, customers must have their own computer, marketing strategy and their little known reputation.

In the future I-Tea Lounge has the possibility of offering a home service for our customers, however our market research tells us that only 10% of our target market has a computer in their home. Over time this figure should increase and would represent itself as an excellent opportunity.

After conducting an analysis of competitors it is clear that our target market isnt currently fully serviced by any of the industry incumbents. This represents an excellent opportunity to not only capture market share from existing competitors but also the creation of new customers.

In the future I-Tea Lounge has the opportunity to expand its business by targeting small business for IT training and also offering a home service.












 

 

 

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