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signature_assignment_team_b.pptxFunding for Online Cleaning Service
TEAM B
JASON GUNSOLUS, VICTOR AYALA, CARLOS MORALES, PAUL FULTZ
Fin/571
April 24, 2017
ANDRES HINOJOSA
Table of Contents
Executive Summary
Information about the Industry
Marketing Plan
Competitor Analysis
3-Year Income Statement
Strategy for Sales Growth and Revenue Goals Achievement
3-Year Proposed Funding Schedule
Break-Even Analysis
Potential International Expansion Plan
Analysis of Country of Expansion
Decision Tree
Conclusion
Executive Summary
Popeye’s Cleaning Service is a startup business that seeks to provide residential house cleaning services for middle class families in the United States.
Popeye’s Cleaning will be an online service that links cleaners to clients through a mobile app.
A high level of professionalism and trustworthiness will help the company to maintain a lot of its clients.
An initial funding of $500,000 is required to start the business
It is projected that in the next three years the company will be able to create substantial revenue and possibly expand internationally.
Popeye’s Cleaning Service is a residential house cleaning service company that seeks to provide its services to middle class families in the United States. The company needs generous capital investments that will be used to structure the company in a manner that will exceed the customers’ expectations. The main target for the company is middle class families that have to work 9-5 jobs therefore lacking time to perform household cleaning. The families who subscribe to this service will receive a high level of professionalism and trustworthiness that is expected to keep them coming back to the company.
The growth rate for this business is relatively high and with the right kind of marketing strategies, Popeye’s Cleaning expects to have substantial income and profits and be able to expand the business to other countries. The company’s founders need initial funding of $500,000 to finally put the plan into action. This presentation represents an analysis of the industry and the company’s strategies to achieve its plan.
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Information on the Cleaning Service Industry
The cleaning industry is a fast growing billion dollar industry in the United States.
The industry offers commercial and residential services
Some of the services provided in the industry include carpet cleaning, janitorial services, and office cleaning.
The industry is expected to grow at a rate of 5.5% annually in the next decade.
There are increasing demographics of people in need of these services.
The technology side of this industry is yet to be explored
The cleaning services industry is a multi-billion dollar industry that is growing at a relatively fast rate in the United States of America. This industry includes cleaning services such as carpet cleaning, janitorial services, and maid services among others that are offered to the commercial and residential markets. This industry is projected to grow at a rate of 5.5% annually in the next ten years (Lovelock, 2011). This is because of the increasing demographics of the amount of people who may need such cleaning services (Lovelock, 2011). For instance, the materials that are used to build houses currently need professional cleaning services. However, the technology part of this industry is yet to be explored. Most of the professional cleaners are linked to their clients through agents. However, Popeye’s Cleaning’ business model involves using a mobile application to link cleaners to clients and this will help to increase the amount of people who can access the company’s services.
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Marketing Plan
Various marketing channels will be used to reach a wider range of audience.
Online marketing techniques to be used include social media interaction and promotion of the company using Google adwords
Print media such as Billboards, Newspapers and Magazines will be used
Online marketing will be used to reach Millennials while print media will be used to reach mid-aged and older customers.
To market Popeye’s Cleaning Service, there are various channels that will be used in order to reach a wider range of people. The two major marketing channels that will be used include the internet and print media. On the internet, the company will market its website using digital marketing technique such as Google Adwords (Lovelock, 2011). Social media sites will also be used for the promotion of the company. For instance, Facebook, Twitter, and Instagram pages will be opened for the company so that it can have one-on-one interaction with the customers. Some of the print media techniques that will be used include Newspaper ads, Magazines, and Billboards. The newspapers and magazines will help to reach millions of people because the editions are read by millions of people across the United States (Lovelock, 2011). The billboards will help to reach all people who may not have access to the newspapers and magazines. These strategies combined will help to increase the popularity of the company.
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Components of a Marketing Plan
Situation Analysis
External Environment
Corporate Review
Product category review
Competitive analysis
Consumer analysis
Brand Review
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Components of a Marketing Plan (cont’d)
Problems and Opportunities
SWOT
Opportunities Analysis
Problems
Strategic Planning, the basic decisions
Marketing objectives
Components of a Marketing Plan (cont’d)
Control and evaluation
Forecasting
Budgeting
Scheduling and timing
Evaluation
Competitor analysis
The main competitors of Popeye’s Cleaning are Brutus Housekeeping and Wimpy’s Cleaning.
Brutus Housekeeping offers residential cleaning services in various states in the U.S.
Wimpy’s Cleaning offers both commercial and residential cleaning services around the U.S.
The main advantage that Popeye’s has over the competitors is its relatively affordable pricing
Popeye’s is also more convenient because of its mobile app that links cleaners to clients
The cleaning services industry is not yet fully explored therefore there aren’t many companies that Popeye’s has to compete with. There are two major established companies that give the company the main competition. These companies include Wimpy’s Cleaning and Brutus Housekeeping. Both of these companies offer cleaning services to its clients. However, Wimpy’s offers its services to both the residential and commercial market while Brutus Housekeeping offers its services solely to the residential market. These companies have a competitive advantage because they are already well-established and have a big market share. However, none of them offer a similar business model to that of Popeye’s services. This company has a mobile application supported by both Android and IOS that help to link the clients to cleaners. Through this application, the client can contact an available cleaner at any time of the day. The services are also very affordable compared to those of the competitors.
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3 year Income Statement Projections
Net Revenue……………………….$350,000
Cost of services offered……………$550,000
Gross Margin……………………….$900,000
Operating Expenses
Sales and Marketing…………………$200,000
Equipment Purchases and Repair……$50,000
General Administrative Costs………..$250,000
Total Operating Expenses……………..$500,000
Gross Profit………………………………$400,000
In the next three years, it is expected that Popeye’s Cleaning will have an annual profit of $400,000. A gross income margin of 900,000 and expenses of 500,000 are expected. The company’s main income is collected from the commission that the cleaners have to pay once they are linked to clients via the Popeye’s mobile app. This will be 20% of their entire payment. It is expected that in the next three years, the company will be able to link over 500 cleaners in a day. Therefore, the revenue that gets to the company for the services offered will be around 550,000 dollars. There are various costs such as the operating and administration costs such as the payment of company executives and office management costs. Additionally, the equipment that the company’s cleaners use need to be updated and repaired consistently so that the cleaners can offer the best possible services.
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How to achieve sales growth and revenue goals
There are various strategies that will be used to achieve the sales growth and the company’s revenue goals.
Competent marketing is one of the strategies that the company’s success relies on.
Marketing will help to acquire both the cleaners and the clients who would benefit from the company’s service.
Provision of quality services will also help to gain more clients.
To achieve these goals the company need an investment of $500,000
The investment will go into the expenses of marketing, purchasing equipment, and administrative costs.
Popeye’s is highly dedicated to achieving sales growth and its revenue goals in the next three years of operation. Therefore, there are various strategies that have been set aside to help the company to achieve its objectives. One of the main strategies that will help the company to achieve its revenue and sales goals is marketing. There are various marketing strategies that have been created to help the company to gain public recognition (Lovelock, 2011). Since this s a service company, it highly depends on the public recognition for the clients to seek its services. Additionally, the company has to provide high quality services so that the clients can gain trust in the company. Though these strategies it is expected that the company will have grown its clients by 100% annually in the next three years. In order for these strategies to be implemented, the company needs an initial investment of $500,000. This money will go into the implementation of the marketing plan, developing the application, buying equipment, and other operational costs.
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3-year Proposed Funding Schedule
Sources of Funds
Equity Investment……………$500,000
Self-Financing…………………$100,000
Bank Loan………………………$25,000
Uses of Funds
Application Development………100,000
Promotion Funds…………………300,000
Equipment Purchases……………100,000
Operating Costs…………………….125,000
There are various sources of funds that will be used to start up this business. The equity financing expected from the investors makes the biggest portion of the funding needed for the company. It is expected that $500,000 will be acquired from the investors in exchange of 20% of the company. The company’s founders have also been able to raise some money on their own through saving and family and friends’ help. This amount totals to 100,000 dollars. A total of 25,000 dollars will be borrowed from financial institutions to be paid at a later date at an interest. The funds acquired from these sources will be used in financing various company expenses. $100,000 will go into the development of the mobile application that will link the cleaners to the clients. Most of the funds will go into the promotion as the company highly depends on its popularity to gain a lot of clients. Some of the money will be used to purchase equipment and finance the operational costs as shown in the proposed funding schedule.
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Break Even Analysis
The Break Even Point is the point where the company’s costs begin to exceed the revenue
The Break Even Quantity (BEQ) = Fixed costs / (Average price per unit – average cost per unit)
BEQ for the company = 900,000/(100-60)= 22,500
This indicates the company will have to sell 22,500 units annually to break even
This is approximately 70 clients a day
The break even analysis is the analysis of the units that are supposed to be sold for a company’s costs to equal its revenue (Bridge & O'Neill, 2012). For a company to stay afloat, the break-even point must be reached. In order for the beak even quantity to be reached, the company needs to know its fixed costs, average prices per unit and the average prices per unit (Bridge & O'Neill, 2012). For Popeye’s Cleaning Service, the fixed costs are 900,000 while the average prices per unit and average costs per unit are 10 and 60 dollars respectively. Therefore, the company has to sell a total of 22,500 units in a year to break even. This is approximately 70 cleaning services a day. The company has the potential to achieve this if the right marketing is used. In the next three years the company will have been able to break even as it is expected to clean over 200 houses in a day.
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Potential International Expansion Plan
In the next three years, Popeye’s Cleaning could expand to offer its services internationally
Appropriate strategies need to be used in the selection of the best countries to expand in.
The selected country for potential expansion is Mexico
Residential cleaning services are not very prevalent, if at all, in Mexico.
The investors expect that in the next three years the company will be able to start expanding to the international market. Choosing the country that the company expands to first is very important as it needs to be a place where the company can comfortably operate so it can achieve profits (Robb & Robinson, 2012). The country that was selected for the potential expansion into, is Mexico. This is because the country is yet to explore the residential cleaning business. Most of the companies in this industry operating in Mexico provide the commercial services. Additionally, Popeye’s Cleaning has a special business model that uses technology to gain the clients hence it is expected to be successful in the Mexican market. There are various other factors that have led to the decision to pick Mexico for the expansion. These factors have been analyses in the next slide of the presentation.
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Analysis of Country of Expansion
The Corporate tax rate for non-resident companies operating in Mexico is 30%.
There are no additional taxes on remitted profits
The country’s business environment is favorable for business.
Registering a company in the country is relatively easy
Resources such as water and electricity are highly accessible
The country has the right demographics for Popeye’s business structure.
Mexico is a favorable country to do business in. One of the reasons for this is the favorable corporate tax rate that is charged for the companies that operate in the country. Resident companies pay a corporate tax rate of 22% while the international companies like Popeye’s pay 30% (Stevens et al., 2012). There are no hidden costs or additional taxes that a re further charged on the companies once they start making profits in the country. Additionally, the process and paperwork needed to register a company in Mexico is fast and easy. The company also has the important resources needed to run a company such as Popeye’s. Over 90% of the country has electricity and water supplies hence it will not be a problem for our employees to perform their role (Stevens et al., 2012). Additionally, the proper demography that is targeted by Popeye’s business model is available in the Mexican market. Therefore, it will be a wise decision for the company to choose Mexico as its first country of international expansion.
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Decision Tree
Cut on Operational Costs
Cut on Online Marketing
Cut on print media
Cut on Equipment
Cut on other operational costs
Cut on Marketing
Cutting Costs
If the investors cut the funding from $500, 000 to 300,000 on the first year, there are various startup costs that will need to be reduced. The marketing and the operational costs have been selected as the points of cutting the costs. The cost of creating the company’s application cannot be tampered with because the app plays a big role in the achievement of the objectives. However, the company can squeeze the marketing costs by cutting back on the financing that goes into this tasks. This will lead to the cutting of some of the print media and online marketing costs. Additionally, the company will need to reduce its operational costs. For instance, the initial equipment to be purchased will have to be reduced them the company will improve as it grows. Other operational costs such as the employee compensation will also be revised so that the company can operate with the lower funding.
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Conclusion
Popeye’s Cleaning Service is a company focused on residential cleaning services for middle class families in the US.
The company uses technology to link clients to cleaners which makes it unique.
The company needs funding of $500,000 to finance for a three year period.
If funding is acquired, the company strongly believes it can gain substantial profits within the period.
Marketing is the main strategy that will help gain clients for the company.
This presentation represents the business model of Popeye’s Cleaning Service, a company startup that uses technology to provide cleaning services for residential homes in the United States. The company has a mobile application that links the clients to cleaners who are closest to them at any time of the day that they may need cleaning services. This is an unexplored industry and hence the company is likely to gain a lot of clients if the right strategies are implemented. In order for this plan to be a reality, the company is looking for an additional funding of $500,000 that will go into all the expenses and marketing of the company’s products. Most of the funding will go into the marketing as the company highly depends on popularity to be successful. The more people know about Popeye’s, the more people will order for the services. Therefore, with the company analysis that has been represented above, the company will be able to break even and make profits in the next three years.
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References
Bridge, S., & O'Neill, K. (2012). Understanding enterprise: entrepreneurship and small business. Palgrave Macmillan.
Lovelock, C. (2011). Services Marketing, 7/e. Pearson Education India.
Robb, A. M., & Robinson, D. T. (2012). The capital structure decisions of new firms. Review of Financial Studies, hhs072.
Ross, S., Westerfield, R., Jaffe, J., & Jordan, B. (2016). Corporate Finance (11th). New York, NY: McGraw-Hill.
Stevens, R. E., Loudon, D. L., Gordon, G., & Williams, T. (2012). Doing business in Mexico: A practical guide. Routledge.
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