2020 IMA Business Case Competition

2020 IMA Business Case Competition——Promote uStartup to lead the industry

Team members:刘颖

胡书玉刘笑瑄

徐诺杜一泓

Existing business

Simplified incorporation

Business proposal writing

Social media marketing consulting

2015-2017The business model was very

successfulUSP experienced soaring growth

2018New service SMM was introduced to reverse current situation and help

attract potential venture capital

2017-2018USP experienced a profit decline

in 2018 since founded due to fierce competition

The management wants us to: evaluate financial data find out problems give future strategies to deal with the problems

Case Overview

uStartup(USP) was founded in 2015 to provide legal and business services to student entrepreneurs

Since the second seed funding counts on the accurate valuation on business performance

Development background

Case Overview ►Current situation & issues ►Solution: Financial & Implementation ►Expected results ►Risk ►Summary

Content1

2

3

4

5

6

Case overview

Current situations & issues

Solution: Financial & Implementation

Expected results

Risk analysis

Summary

• Macro-environment• Industry situation• Financial situation• Company situation

• Service adjustments• Online & offline marketing• Implementation

• Forecast income• Feasibility analysis

• Risk identification• COSO framework

Current situation & issues

•Rapid and sustained

economic growth

•Vigorous development of

the tertiary industry

(service sector)

T Technology

Big Data

Cloud Computing

APP

Precision MarketingIT

AI

Insights:The advancement

of IT have 2 affects

on startup service.

① Accelerat ion

② ToolsDo college students want to start their own business?

69% 31%YES NO

• Highest entrepreneurial intention in the world

• Campus Entrepreneurship Boom

• Social concept changes:

--> Past: a stable job (eg. civil servant)

--> Nowadays: entrepreneurship is a new trend

• Consumer behavior:

take orders on mobile phone rather than PC

SocietyS

45%

46%

47%

48%

49%

50%

51%

52%

53%

0

100000

200000

300000

400000

500000

600000

700000

800000

900000

1000000

2014 2015 2016 2017 2018

(100

mill

ion)

GNP of China

Tertiary IndustrySecondary IndustryPrimary IndustryThe Proportion of the Tertiary Industry

EconomyE

We encourage scientific and technicalpersonnels and college students to starttheir own businesses.Government

“We will lower the threshold, expand venturecapital and create a comfortable climate forstartups. We will also develop the startupservice market and build certain platforms tosupport startups.”

State Council

Mass Entrepreneurship and Innovation Policy

Prime Minister

PoliticsP

Current macro-environment >> Policy support, steady economic growth, change of minds and technology advancement


IntroductionGrowth

MaturityStable

Insights:① Startup service industry is a sunrise industry. ② Startup service industry is still in the growth stage.

Decentralized(Distrubution in 2016)

Guangdong and Beijing Ranked first(Distrubtion of the 1st and 2nd batches)

Less geographic concentrated & More balanced distribution3

18%

17%

13%11%

8%

7%

7%

5%

14%

The Industry of Newly Registered Enterprises in 2016

Startup Service

E-commerce

Entertainment

Finance

Local Lifestyle

Education

Social Network

Health and Care

Others

Low market entry barriers & More new entrants & Popular choice2

196250

365

444

553607

670

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

50.00%

0

100

200

300

400

500

600

700

800

2012 2013 2014 2015 2016 2017 2018

Number of Newly Registered Enterprises in China（10k）

Growth Rate

13671528

1819

2187

2596

3034

3474

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

0

500

1000

1500

2000

2500

3000

3500

4000

2012 2013 2014 2015 2016 2017 2018

Number of Existing Enterprises in China（10k）

Growth Rate

Increasing number of S&M enterprises & High demand & Huge market1

Current industry situation >> Huge market demand and the geographically decentralization trend


co-working spaces

financing service

professional service

media platform

business incubator

coaching&training

Six Types of Major Business Model and Competitor Landscape

0

2

4

6

8

10Professional Support

Reputation

Media PlatformIT

Customerization

New Entrants

TraditionalEnterprises

1

2

Insights:① Fierce competition② Multi-dimensional pattern③ Specialization and differentiation➡ Expand existing business ➡ Provide more comprehensive and personalized service

Current industry situation >> Competitor profilesCase Overview ►Current situation & issues ►Solution: Financial & Implementation ►Expected results ►Risk ►Summary

Comparative Advantages of Different Types of Competitors

35.58%

12.77%

45%

5%

0.00% 10.00% 20.00% 30.00% 40.00% 50.00%

gross margin

revenue growth

traditional companies average USP

Current financial situation >> Horizontal comparison between different services


Overall revenue growth and gross margin Revenue by sector

Cost management problems

Increasing market

competition

Declining of service quality

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

2017 2018

SI BP SMM

-3%

-3%



CM ratio by sector in 2017 CM ratio by sector in 2018

The CM ratio of both SI and BP has increased, while the CM ratio of SMM is relatively lower

RMB('000) 2017 2018 Growth rate

CostLabor costs 7,160 6,480 10.49%

Platform 2,000 1,200 66.67%

Expenses

Marketing 500 200 150.00%

Rent 520 500 4.00%

Training 400 100 300.00%

Interests 200 200 0.00%

Wages and admin. 1,550 1,500 3.33%

12610

14220

39.10%35.58%

19.27%

13.29%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

11500

12000

12500

13000

13500

14000

14500

2017 2018revenue gross margin net profit margin

Rewarding incentives to

those who introduce customers

The IT team developed a

mobile APP bythemselves

More exclusive consultants and the new service

SMM


Current financial situation >> Historical comparison on financial performance between 2017 and 2018

Revenue, gross profit margin and net profit margin

Costs and expenses

Capitalize(5 years)

Bring future benefits

Increase net profit margin


Current financial situation >> Historical comparison on financial performance between 2017 and 2018

Break-even percentage

Margin of safetypercentage

Degree of operating leverage

1.24

1.26

1.25

1.28

2017 2018

SI BP

= 𝐂𝐂𝐂𝐂𝐂𝐂𝐂𝐂𝐂𝐂𝐂𝐂𝐂𝐂𝐂𝐂𝐂𝐂𝐂𝐂𝐂𝐂𝐂𝐂𝐦𝐦𝐦𝐦𝐂𝐂𝐦𝐦𝐂𝐂𝐂𝐂𝐍𝐍𝐍𝐍𝐂𝐂 𝐂𝐂𝐨𝐨𝐍𝐍𝐂𝐂𝐦𝐦𝐂𝐂𝐂𝐂𝐂𝐂𝐦𝐦 𝐂𝐂𝐂𝐂𝐢𝐢𝐂𝐂𝐦𝐦𝐍𝐍=

𝐒𝐒𝐦𝐦𝐒𝐒𝐍𝐍𝐒𝐒 − 𝐁𝐁𝐁𝐁 𝐑𝐑𝐑𝐑𝐁𝐁𝐒𝐒𝐒𝐒𝐦𝐦𝐒𝐒𝐍𝐍𝐒𝐒=

𝐅𝐅𝐂𝐂𝐅𝐅𝐍𝐍𝐅𝐅 𝐢𝐢𝐂𝐂𝐒𝐒𝐂𝐂𝐂𝐂𝐂𝐂𝐂𝐂𝐂𝐂𝐂𝐂𝐂𝐂𝐂𝐂𝐂𝐂𝐂𝐂𝐂𝐂𝐂𝐂𝐂𝐂𝐦𝐦𝐦𝐦𝐂𝐂𝐦𝐦𝐂𝐂𝐂𝐂 𝐨𝐨𝐍𝐍𝐂𝐂 𝐂𝐂𝐂𝐂𝐂𝐂𝐂𝐂

31.85%

21.58%

80.02% 78.31%80.80% 79.10%

2017 2018

Overall SI BP

68.15%

78.42%

19.98% 21.69%19.20% 20.90%

2017 2018

Overall SI BP

Higher financial risk

Insights:•BP service: main reason for customer satisfaction decrease •Decline in service quality: the proportion of exclusive & non-exclusive consultants•Increasing cost in labor: no equal business volume growth

Problems in business model canvas format

0.78%

3.82%

0.00%0.50%1.00%1.50%2.00%2.50%3.00%3.50%4.00%4.50%

Complaint rate

SI

BP80

340

Complaints number comparisonbetween different businesses(2018)

SI

BP

Compared to the growthrate of service numbers (---3.05%), the growth rate ofemployee number (24.6%)is higher.

The phenomenon of brain drain is apparently improved.

A decrease in bothservice level andcustomer

satisfaction.

81

65

Average employee number

15%

35%

2018

2017

Advisors turnover

420

300

2018

2017

Number of Complaints

Current company situation >> Problems of operation and management reflected by the non-financial data


A startup service provider mainly focused on college students

Problems with human resource and marketing

SI, BP and the newly introduced SMM as sources of revenue

Increasing expense leads to a significant decrease in profitability

Business Portrait of USP 1

2 SWOT analysis

Facing large market but also fierce competition

Current situation & issues >> Summary

Opportunity Threat

O• Early foundation• Specific target customers• Specialization• One-to-one service

W• Lack of resources & Small scale• Higher price• Low customer satisfaction• Poor cost management

S• Trend of entrepreneur • Huge market demand• Policy support• Multi-dimensional market

T• Other competitors's threat• Loss of human resource• Higher MOS and DOL contribute to

higher financial risk

SWOT

Strength Weakness



Strategies fromSWOT AnalysisStrategies fromSWOT AnalysisThe Strategy Clock

Solution: Financial & Implementation >> Strategy OverviewCase Overview ►Current situation & issues ►Solution: Financial & Implementation ►Expected results ►Risk ►Summary

LowLow

High

High

Price

PerceivedAddedValue

The Strategy Clock:Bowman's Strategy Options

HybridDifferentiation

Focuseddifferentiation

Low price

Low pricelow added value

Strategies destined for ultimate failure

Customer Segments Strategic GoalsCustomer Segments Strategic GoalsThe Strategy Clock

From Standardization to Specialization

Overall Corporate Strategy

Competitive Strategy

Functional Strategy

Steady Growth Strategy

SO: Support Business GrowthWO: Cooperate With CollegeST: CustomizationWT: Strengthen Competitive Status

Operations:Expand Business & Human ResourceFinance:Lower The CostMarketing:Online & Offline

• Main customers:

College students

[one-to-one specialized service]

• Others:

S&M enterprises

[only standardized service]

Enhance profiles

Grow the business

Maintain excellent service

Strategy 1 >> Setting different prices for different levels of services & providing more choices for different groups with various demand.

2. The new pricing plan for traditional services boosts revenue

price SI service BP service form targeted customers

purpose

low

streamline &

standardize services

polish the existing plan

onlinecountry-wide entrepreneurs

who have basic knowledge

increase the units

highone-on-

one tutoring

customize and whole-

process guidance

offline

university students who are unfamiliar

with the process

increase the price

sales = P × Qlower price attracts more customers from the internet

higher price for higher service quality strengthens the profitability

1. Provide low and high price services to attract different customer groups

origin sales = P × Q = 500 × 10,200 = 5,100,000

higher P' × Q'= 1,000 × 1,500= 1,500,000

higher Q' × P'= 300 × 13,260= 3,978,000

total revenue for SI service= 5,478,000 7.41%

origin sales = P × Q = 800 × 8,900 = 7,120,000

higher P' × Q'= 1,200 × 1500= 1,800,000

higher Q' × P'= 11,570 × 500= 5,785,000

total revenue for BP service= 7,585,000 6.53%


Strategy 2 >> Further explore the potential market of SMM business

1. Extend the SMM service from advisory to agency to get more revenue

big platforms our company startup companies

no experience to negotiate with the big company

the cost of time and money is high

long term corporation

using AI to analyze

help them connect to

the platform

consult based on the data

offer lower price charge a commission

just providing consulting services is not enough.

2. Signing exclusive contracts to reduce the labor cost and improve the service quality

origin revenue = 1,000 × 2,000 = 2,000,000

expected revenue= 1,000 × 32,000 = 32,000,000

follow the assumption in case:the quantitives of services would grow at a speed of 60%（price remained the same) 60%

origin CM = ( P - VC ) × Q = 800,000

expected CM = 2,880,000CM ratio = price / unit CM = 60%

given the assumption :hire 20 exclusive consultantsfixed wages:80,000; variable commission:400

quite higher

260%


Strategy 3 >> Launch innovative financing services to earn more profit

1. Providing overall services to help start-ups get financing

Coaching and training the entrepreneurial team

face-to-face meeting recording online classes invite some successful entrepreneurs to give

lectures and share their advice. explain the common mistakes of students in

starting a business, teach the development path and channels of a

start-up company introduce the important matters related to

investment and financing

Helping startup companies get financing

investors

startups

Help the startups get tickets to other official organizers' roadshows

Hold a simulated road show to provide students with the opportunity to polish their performance in road show

charge commission as our revenue


pain point:lack of financing resources and social relationship

Coaching and training the entrepreneurial team Helping startup companies get financed

assumption: average amount of successful financing = 3,000,000 we charge 1% of financed amount as our commission considering this is a new business, we conservatively estimate the number of successful financing is 50

per year we plan to hire 20 people and their fixed wage is 20,000 per year and they can get 15,000 as their

commission.

expected revenue per year =1,500,000

total labor cost = variable cost + fixed cost = 750,000 + 400,000 = 1,150,000CM ratio= CM / revenue = 50%Break even point = fixed cost / CM = 27

Insight:the new business creates another way to promote the sales so as to resist more intense competition in the current market

2. Aiming at the target customers to lower down the risk

Industries and regions with a higher number of financing events represent greater potential

Focusing on startups in popular industries and regions makes it more likely that we can help companies raise capital and earn more commissions

Strategy 4 >> Combine both online and offline channels to promote our brand effectively rather than the original reference program.


become sponsors → enhance popularity among college students

Encourage students to carry out innovation and entrepreneurship → obtain potential customers

accumulate brand reputation

Offline channels

• Cooperate with some student

organizations of the university

• Hold entrepreneurship competitions

• Carry out free training lectures and

salons in universities & invite

seniors to share experience

Online channels

• Create a Q&A communication Forum

• Optimize the website

• Make APP functions integrated and

set up multi-role login interface

• Establish WeChat groups in the

customer's school audit system for quality control

Forum

Insert APP QR code for drainage

APP

Website

WeChatmaintain

customer base

Open and transparent information real-time tracking of service progress online payment A two-way choice for investors and

entrepreneurs

Offline channels

• Cooperate with some student organizations of the university

• Hold entrepreneurship competitions• Carry out free training lectures and

salons in universities & invite seniors to share experience

Online channels

• Create a Q&A communication Forum• Optimize the website which is the most

original way of attracting customers• Make APP functions integrated and set up

multi-role login interface• Establish WeChat groups in the school

combinationinteraction

omni-channel: combination of online and offline

Strategy overview >> New business model has a significant effect on future financial performance

marketing online & offline

simplified incorporationbusiness proposal writing

trademark registrationpatent certificate

basic services

one package service creates more profit margin

social media marketing service

big social media platform

small social media platform

financing helplecture & tutor

road show

get customers

university students

non-student


solve the pain point of students is our differentiation

problems solutions

fierce competition

low price strategy

higher labor cost

poor performance

high marketing expense

low sales increase rate

lower price service

ensure market share

high price service with excellent service & extended business line

ensure the profitability

using AI and big data technology

cost-efficient way of promotion 5,100,000 5,478,000

7,120,000 7,585,000

2,000,0003,200,0000

1,500,000

2018's revenue expected revenue

Total service revenue

Financing

SMM

BP

SI

25%

Expected results

2019E 2018 2017

Revenue 17,763,000 14,220,000 12,610,000

Cost of sales:

Labor Costs (9,305,500) (7,160,000) (6,480,000)

Platform (400,000) (2,000,000) (1,200,000)

Total cost of sales (9,705,500) (9,160,000) (7,680,000)

Gross Profit 8,457,500 5,060,000 4,930,000

Expenses:

Marketing (100,000) (500,000) (200,000)

Rent (540,800) (520,000) (500,000)

Training (700,000) (400,000) (100,000)

Interests (200,000) (200,000) (200,000)

Wages and admin (1,627,500) (1,550,000) (1,500,000)

Total expenses (3,168,300) (3,170,000) (2,500,000)

Net operating profits 4,889,200 1,890,000 2,430,000


Expected results >> Forecast income from operations

1 Pro forma income statement including three years

2019E 2018 MarginRevenue 17763000 14220000 3543000 24.92%

Forecast income from operations



2 Pro forma income statement comparing two years

Revenue will go up by almost 25% due to SMM and new businessExpenses 2019E 2018 MarginLabor costs (9305500) (7160000) (2145500) 29.97%

Platform (400000) (2000000) (1600000) -80.00%

Marketing (100000) (500000) 400000 -80.00%

Training (700000) (400000) (300000) 75.00%

Main services' high quality costs more

Cut down the supporting costs

Better cost structure

2019E 2018 MarginNet operating profits 4889200 1890000 2999200 158.69%

Gross margin ratio will be 45.36%, close to industry average level 45%

Labor costs 30%

Hire more consultants

Platform costs 80%

Capitalize the R&D expenseMarketing expense 80%

Alter marketing strategy

Training expense 75%

Improve our service quality



Expected results >> A financing plan for investors

SMM Financing

Labor cost’s difference(2018-2019) 1,680,000 1,150,000

Other expenses’ difference(2018-2019) 300,000

Total 3,130,000

1 Financing Plan

Focus on fund for the development of SMM and

Financing unit

Difference analysis

No given Balance Sheet——hard to estimate cash balance

2 Financing use

3 Feasibility analysis

Sustainable customer network

Revenue 25%

Service quality improvement

Accurate positioning of target customers

Customized and hierarchical service

Hire more exclusive consultants for SMM and Financing

Perfect staff training system

SMM>>steady growth

Financing>>strong start

Risk analysis

Risk MapClassification Solutions

A: Structure risks• Social media imposes

streaming restrictions.• Policy controls KOLs’

advertisements.

B:Operational risks• Privacy data violation• Complaint for low-quality

services about SMM

C:Competiton risks• Homogeneous sevices• Price war & Brain drain• less trust and loyalty to

USP’s KOLs than to other famous KOLs

Make a preliminary planand pay attention to the potential market timely

Review and update the online platfom regularly

Strengthen supervision of users' data protection

Compensate and improve

Optimize personalized and diverse services

Discount & lower cost Increase salaries Cut loss in time according

to sensitivity analysis


Risk identification >> Overview of Risk analysis

A: Structure

externalcircumstances

B:Operational

the process of operation

C:Competition

competitors & industry

D: Financial

cash flow deficit

Severity

High risk

probability

Medium risk

Low riskA

D

BC

Source: group analysis,information collected online

Lower DOL leads to less increase of EBIT when sales are increasing.

The risk is lower when the number of services

goes down


Margin of Safety Percentage

= ( Sales - BE dollars ) / Sales

MoS Percentage of SMM and T&F is much lower

these two businesses have more risk facing the

uncertain future

Break-even Point

= FC / ( Sales - VC )

new classification of business with different

prices makes some kind of services have lower

break-even point

lower risk

Semi-DIYNon-DIY

AdvancedBasic

Break-even PointMargin of Safety Percentage

Degree of Leverage = (Sales-VC) / (Sales-VC-FC)

3.14

4.63

1.50

0.000.501.001.502.002.503.003.504.004.505.00

2017 2018 2019

Degree of leverage

Risk identification >> Financial Risk Analysis using three accounting indicators

net operating income in grids of this kind of light blue color is higher than the previous one

acceptable

Single factor sensitivity coefficient : The extent to which a change in an independent variable results in a change in the dependent variable, assuming that all other factors remain unchanged

Units(SMM)

PriceFC

Units(T&F)

Price(SMM) Units(T&F)


Risk identification >> Sensitivity Analysis offers the vary range of different variables that we should pay attention to

1. We recognize some critical risk points with the help of SENSITIVITY ANALYSIS, for the purpose of implementing COSO FRAMEWORK

320000 2880 3040 3200 3360 35201100 416000 528000 640000 752000 8640001050 272000 376000 480000 584000 6880001000 128000 224000 320000 416000 512000950 -16000 72000 160000 248000 336000900 -160000 -80000 0 80000 160000850 -304000 -232000 -160000 -88000 -16000

35000 35 40 45 50 6026000 -15000 40000 95000 150000 26000027000 20000 80000 140000 200000 32000028000 55000 120000 185000 250000 38000030000 125000 200000 275000 350000 50000032000 195000 280000 365000 450000 62000034000 265000 360000 455000 550000 740000

320000 900 950 1000 1050 11001360000 240000 400000 560000 720000 8800001440000 160000 320000 480000 640000 8000001520000 80000 240000 400000 560000 7200001600000 0 160000 320000 480000 6400001680000 -80000 80000 240000 400000 5600001760000 -160000 0 160000 320000 4800001840000 -240000 -80000 80000 240000 400000

350000 45 50 55 60 65350000 325000 400000 475000 550000 625000360000 315000 390000 465000 540000 615000400000 275000 350000 425000 500000 575000410000 265000 340000 415000 490000 565000420000 255000 330000 405000 480000 555000470000 205000 280000 355000 430000 505000480000 195000 270000 345000 420000 495000

The net operating income from a combination of different prices and sales

The net operating income from a combination of different fixed costand units

SMM T&Fprice 10 4sales 6 2VC -4 -2FC -5 -1

The most sensitive variable: price, The least sensitive variable: variable wages for the staffsSo price war in the industry will largely threaten our NOI

Identified risk from sensitive analysis• Decrease in unit service prices of SMM and T&F• Increase in fixed salaries of consultants

if NOI within acceptable level

if NOI lower than previous one

Follow the trends of market: decrease unit service price increase fixed salaries Communicate with related

consultants ,understand and try to satisfy their needs considering theri performances

Cease the operation of that serviceCUT LOSSES IN TIME

Find new business model to adapt to the new market and industry environment

Coping measures in daily operation Check accounts and cash flows regularly in case

of cash drain Choose financing methods wisely and timely to

prevent funding gaps and credit risk

Risk identification >> Risk analysis under the COSO frameworkCase Overview ►Current situation & issues ►Solution: Financial & Implementation ►Expected results ►Risk ►Summary

Risk Accessment

Control ActivitiesControl Environment

Information and Communication

COSOMonitoring

Build a overall control environment to lower down the risk probability

Form a mature risk accessment system to identify the risk timely

Current situation Key strategies & initiatives Risks Mitigation

Find the painpoints of customers and build our own differentiation

Industry situation• Huge demand for startup services• Low entry barriers & fierce competition• Declining geographic concentration

Financial situation• Higher financial risk• A significant decrease in profitability• Problems with cost management• BP has greater contribution

• A startup service provider mainly focused on college students

• Huge market but also fierce competition• Problems with profitability

Macro-environmental • Policy support & entrepreneurial intention• Rapid and sustained economic growth• Advanced technology accelerate startups

15

• Improve enterprise financial performance• Enhance brand recognition, image and memory

along whole consumer decision journey• Get second seed funding from investors

Brand position• Tailored service for the needs of startups• Differentiate by solving the pain point of students• Provide hierachical service for different needs

Marketing strategy• Set up Wechat groups in targeted universities• Hold campus competition• Construct a forum&optimize APP and web page

Channel optimization• Build an online and offline cycle• Cooperate with universities closely for new clients• Optimize APP and web using experience• Build community on social media like WeChat

Loyalty management• Implement full lifecycle consumer management• Accelerate customer complaint response• Build long-term good relationships with clients

• Structure Risks• Operational Risks• Competition Risks• Financial Risks

Structure Risks• Social media

imposes streaming restrictions.

• Policy controls KOLs’ advertisements.

Operational Risks• Privacy data violation• Complaint for low-

quality services about SMM

Competition Risks• Homogeneous

sevices• Price war & Brain

drain• less trust and loyalty

to USP’s KOLs than to other famous KOLs

Financial Risks• Cash Deficit

• preliminary planning

• Technology maintain and update

• Optimize diverse services

• Increase cousulants' salaries and sales prices of unit service in a limited amount

• Cut loss in time—Stop the strategy which is more likely to lead to cash deficit and credit risk


Summary >> Our report not only suggests new directions for existing corporate problems but also assesses risks for the new strategy

Company situation• Specific target customers• Specialized service• Low customer satisfaction

Thank you!

Appendix >> Non-financial data

Complaint Rate

SI BP

Number of complains 80 340

Number of services 10200 8900

Complaint rate 0.78% 3.82%

Disproportionate Growth

2017 2018 Growth rate

Average employee number 65 81 24.6%

Number of services 19700 19100 -3.05%

Appendix >> Financial forecast

Current data ValueSMM's sales growth rate in the next two years (with the unit sales price unchanged) 60%

Total market size in 2018 2billionMarket share of SMM after three years 10%Average gross profit margin of industry 45%

Average sales revenue growth rate 5%Rate that customers are dissatisfied with traditional enterprises 50%

Assumption ValueGrowth rate of service times provided by basic services 30%

The financing service unit price is 3 million, and the rate of financing services is 50times a year -

Financing service extraction rate 1%SI service employees can move with SMM and new business departments -

Increase of advanced service quality leads to a halving of the number of services per person per year (150 times) -


Revenue SI BP

SMM Finance TotalBasic Advance Half-DIY DIY

Unit price 300 1,000 500 1,200 1,000 30,000 -

Times 13,260 1,500 11,570 1,500 3,200 50 -

Subtotal 3,978,000 1,500,000 5,785,000 1,800,000 3,200,000 1,500,000 -

Total 5,478,000 7,585,000 3,200,000 1,500,000 17,763,000 Revenue in

2019 5,100,000 7,120,000 2,000,000 - 14,200,000

Revenue growth rate 7.41% 6.53% 60.00% - 25%

Labor Cost SI BP

SMM Finance TotalBasic Advance Half-DIY DIY

Variable cost / 400 150 450 400 15,000 -

Times 13,260 1,500 11,570 1,500 3,200 50 -

Fixed cost(per employee) 70,000 17,500 37,500 40,000 80,000 20,000 -

Employee number 15 10 16 11 20 20 92

Subtotal 1,050,000 775,000 2,335,500 1,115,000 2,880,000 1,150,000 9305500

Total 1825000 3450500 2,880,000 1,150,000 7160000


Expenses2018 Reason 2019

Platform 2,000,000 Outsource 2,000,000 Marketing 500,000 Change strategy 100,000

Rent 520,000 Increase as usual 540,800

Training 400,000 Arithmetic progression growth 700,000

Interests 200,000 - 200,000 W&A 1,550,000 Increase by 5% 1,627,500 Total 5,168,300

2019E 2018 2017 Revenue 17,763,000 14,220,000 12,610,000

Cost of sales:Labor Costs (9,305,500) (7,160,000) (6,480,000)

Platform (400,000) (2,000,000) (1,200,000)Total cost of sales (9,705,500) (9,160,000) (7,680,000)

Gross Profit 8,457,500 5,060,000 4,930,000 Expenses:Marketing (100,000) (500,000) (200,000)

Rent (540,800) (520,000) (500,000)Training (700,000) (400,000) (100,000)Interests (200,000) (200,000) (200,000)

Wages and admin (1,627,500) (1,550,000) (1,500,000)Total expenses (3,168,300) (3,170,000) (2,500,000)


A. Performance appraisal to improve service quality.From part-time consultant to exclusive consultant, the basic salary will be increased in order to motivate consultants to improve their service quality. And after sales return visit, the reasons for the complainant interview, so as to carry out the necessary personnel transfer.

B. Long-term career planning to retain talentsAfter working for a certain number of years, employees can be promoted to be the chief consultant, and then they can become partners and get shares of the company, so as to enhance employees' stickiness to the company, rather than simply increasing the price and increasing our own costs.

C. Excellent students feedbackGraduates who have already been coached can stay on the platform or give lectures

D. Signed "trainee"We directly sign contracts with people who have the intention to work in the industry, promising to train them as exclusive consultants and not leave within a certain period of time in default. This will increase the number of upstream suppliers from the root (because we are actually training suppliers ourselves) and prevent consultants from being lured away by high salaries.

Appendix >> Solve the problem of complaint rate and high salary in the industry

A. Q&A Forum (refer to the NPC Economic Forum)• Rewards will be given to those who upload materials, and the more thumb ups, the

more rewards will be given, so as to encourage users to share seriously and enhance the attractiveness of the platform. Posts are subject to review for quality control

• Users will be charged for downloading materials, from which USP can receive commissions

• Advertisements of the third party or USP itself can be placed on the forum to attract the attention of users

B. APP on mobile phone (multi-role login interface)• Entrepreneurs -- provide transparency information and real-time tracking of service

progress; support online payment• Investors -- similar to Taobao; allows investors to sift through information (eg: industry,

age) to see the basics of each startup, business proposal, etc• Tourists-- introduce specific content of USP’s various services and provide artificial

consultation service

C. Website (the original way to attract customers to know us)• Set up artificial service to provide in-depth consultation for free• Insert the QR code of APP to attract visitors to download it• Set up a special area on the website to introduce successful cases and invite previous

users to share their experiences to enhance brand image

Appendix >> Details about the online platforms

Insights:The advancement of information technolohy will not only arouse passion for entrepreneurship and accelerate development of startup service,but also become the tools to support it.

45%

46%

47%

48%

49%

50%

51%

52%

53%

0

200000

400000

600000

800000

1000000

2014 2015 2016 2017 2018

(100

mill

ion)

GNP of China

Tertiary IndustrySecondary IndustryPrimary IndustryThe Proportion of the Tertiary Industry

PoliticsP E

S T

We encourage scientific and technical personnels and college students to start their own businesses.

Mass Entrepreneurship and Innovation Policy

Prime Minister

“We will lower the threshold, expand venture capital and create a comfortable climate for startups. We will also develop the startup service market and build certain platforms to support startups.”

State Council

Government

Economy•Rapid and sustained economic growth

•Vigorous development of the tertiary industry (service sector)

• Entrepreneurial intention of China is the highest in the world.

• Campus Entrepreneurship Boom• Change in social concepts: --> In the past: a stable job (eg. civil servant)--> Nowadays: entrepreneurship is a new trend• Consumer behavior: take orders on mobile

phone rather than PC

Society

Do college students want to start their own business?69% 31%YES NO

Technology

Big Data

Cloud Computing

APP

Precision MarketingIT

AI

Current macro-environment >> Policy support, steady economic growth, change of minds and technology advancement


Industry Analysis

Distrubtion of The First and Second Batches of Startup Service Platforms--Guangdong and Beijing Ranked first

The number of S&M enterprises increases steadily, the demand for startup service is high and the market is huge .

1367 15281819

21872596

30343474

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

0

1000

2000

3000

4000

2012 2013 2014 2015 2016 2017 2018

Number of Existing Enterprises in China（10k）

Growth Rate

196250

365444

553607

670

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

0

200

400

600

800

2012 2013 2014 2015 2016 2017 2018

Number of Newly Registered Enterprises in China…Growth Rate

18%

17%

13%11%

8%

7%

7%

5%

14%

The Industry of Newly Registered Enterprises in 2016

Startup Service

E-commerce

Entertainment

Finance

Local Lifestyle

Education

Social Network

Health and Care

Others

1 2

Declining geographic concentration of start-up service platform and more balanced national distribution.3

Distrubution of Startup Service Platforms In 2016 -- Decentralized

Insights:Startup service industry is a sunrise industry that is still in the growth stage.

IntroductionGrowth

MaturityStable

Current industry situation >> Huge market demand and the geographically decentralization trend


Low market entry barriers. More new entrants. Startup service is the hottest for entrepreneurs.

co-working spaces

financing service

professional service

media platform

business incubator

coaching&training

Six Types of Major Business Model and Competitor Landscape

0

2

4

6

8

10Professional Support

Reputation

Media PlatformIT

Customerization

New Entrants Traditional Enterprises

1

2

Insights:Due to fierce competition, startup service industry is forming a multi-dimensional pattern, with more specialization and differentiation.➡ Expand existing business and try to provide more comprehensive and personalized service.

Current industry situation >> Competitor profilesCase Overview ►Current situation & issues ►Solution: Financial & Implementation ►Expected results ►Risk ►Summary

Summary:1. Currently there are many subdivided fields forming an obvious industry differentiation trend. 2. Various types of startup

service providers have developed different service features relying on their own resource advantages. 3. They provide targeted services for customers with different fields, backgrounds and characteristics.

Comparative Advantages of Different Types of Competitors

35.58%

12.77%

45%

5%

0.00% 10.00% 20.00% 30.00% 40.00% 50.00%

gross margin

revenue growth

traditional companies average USP

2 BP has a greater contribution to revenue compared to the other two services

2017 2018

1 Although USP’s revenue growth rate is higher than the industry average, its gross profit margin is lower

There are some problems with cost management

3 The CM ratio of both of SI and BP has increased, while the CM ratio of SMM is relatively lower

SICM ratio=59.5%

BPCM ratio=61.2%

𝐶𝐶𝐶𝐶 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 =𝐶𝐶𝑟𝑟𝐶𝐶𝑟𝑟𝑟𝑟𝑟𝑟𝐶𝐶𝐶𝐶𝑟𝑟𝑟𝑟𝑟𝑟𝐶𝐶 𝑚𝑚𝑟𝑟𝑟𝑟𝑚𝑚𝑟𝑟𝐶𝐶

𝑆𝑆𝑟𝑟𝑆𝑆𝑆𝑆𝑆𝑆

2017


Case Overview ►Current situation & issues ►Solution: Financial & Implementation ►Expected results ►Risk ►summary

＞

2018

Insight:Both MoS and DoL show that we have higher financial risk

80.80%

79.10%

80.02%

78.31%

31.85%

21.58%

2017

2018

overall BP SI

1 Due to the decrease in sales caused by fierce competition, both services and the overall margin of safety have declined

2017 SI BP

sales 5,250,000 7,360,000

break-even point 1,007,997 1,470,378

margin of safety 4,242,003 5,889,622

2018 SI BP

sales 5,100,000 7,120,000

break-even point 1,065,672 1,544,469

margin of safety 4,034,328 5,575,531

Margin of safety percentage = 𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀 𝑜𝑜𝑜𝑜 𝑠𝑠𝑀𝑀𝑜𝑜𝑠𝑠𝑠𝑠𝑠𝑠 𝑀𝑀𝑀𝑀 𝑑𝑑𝑜𝑜𝑑𝑑𝑑𝑑𝑀𝑀𝑀𝑀𝑠𝑠

𝑆𝑆𝑀𝑀𝑑𝑑𝑠𝑠𝑠𝑠 𝑀𝑀𝑀𝑀 𝑑𝑑𝑜𝑜𝑑𝑑𝑑𝑑𝑀𝑀𝑀𝑀𝑠𝑠

2

1.24

1.26

1.25

1.28

2017 2018

SI BP

Both of SI and BP show an increase in degree of operating leverage, and the DOL of BP is higher than that of SI

Degree of operating leverage = 𝐶𝐶𝑜𝑜𝑀𝑀𝑠𝑠𝑀𝑀𝑀𝑀𝐶𝐶𝐶𝐶𝑠𝑠𝑀𝑀𝑜𝑜𝑀𝑀𝑚𝑚𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑁𝑁𝑠𝑠𝑠𝑠 𝑜𝑜𝑜𝑜𝑠𝑠𝑀𝑀𝑀𝑀𝑠𝑠𝑀𝑀𝑀𝑀𝑀𝑀 𝑜𝑜𝑀𝑀𝑜𝑜𝑜𝑜𝑀𝑀𝑠𝑠

greater sensitivity & higher risk

Higher DOL



1 From 2017 to 2018, in spite of the substantial increase in revenue, both gross profit margin and net profit margin declined

RMB('000) 2017 2018 Growth rate

Costlabor costs 7,160 6,480 10.49%

platform 2,000 1,200 66.67%

Expenses

marketing 500 200 150.00%

rent 520 500 4.00%

training 400 100 300.00%

interests 200 200 0.00%

wages and admin 1,550 1,500 3.33%

12610

14220

39.10%35.58%

19.27%

13.29%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

11500

12000

12500

13000

13500

14000

14500

2017 2018

revenue gross margin net profit margin

2

Launched a reference program rewarding incentives to those

who introduce customers

platform costs & marketing &

training expenses have increased by more than

50%

The IT team developed a mobile APP by themselves

Signed exclusive consultantsand developed the new service

SMM


Current financial situation >> Historical comparison between financial performance in 2017 and 2018

Both costs and expenses have increased significantly from 2017 to 2018

Insight:The increase of various expenses leads to a significant decrease in profitability

80

340

Complaints number comparisonbetween different businesses(2018)

SI

BP

0.78%

3.82%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

Complaint rate

SI

BP

Insights:• The decrease in customer satisfaction

in 2017-2018 are mainly due to BP service.

• The decline in service quality is related to the proportion of exclusive and non-exclusive consultants.

• The increasing cost in labor didn't bring out a equally business volume growth.

Current company situation >> Problems of operation and management reflected by the non-fincial data

There is a decrease in the service level and customer satisfaction.

The phenomenon of brain drain is apparently improved.

Compared to the growth rate of service numbers(-3.05%), the growth rate of employee number(24.6%) is higher.


420

300

2018

2017

Number of Complaints

15%

35%

2018

2017

Advisors turnover

81

65

2…

2…

Average employee number

problems in business model canvas format

A startup service provider mainly focused on college students

Problems with human resource and marketing

SI, BP and the newly introduced SMM as sources of revenue

Increasing expense leads to a significant decrease in profitability

Business Portrait of USP 1

2 SWOT analysis

Facing large market but also fierce competition

Current situation & issues >> Summary

Opportunity Threat

S

O

W

T• Early foundation• Specific target customers• Specialization• One-to-one service

• Lack of resources & Small scale• Higher price• Low customer satisfaction• Poor cost management

• Trend of entrepreneur • Huge market demand• Policy support• Multi-dimensional market

• Other competitors's threat• Loss of human resource• Higher MOS and DOL contribute to

higher financial risk

SWOT

Strength Weakness



• Main cutomers: College students[one-to-one specialized service]• Others:S&M enterprises [only standardized service]

LowLow

High

High

Price

PerceivedAddedValue

The Strategy Clock:Bowman's Strategy Options

HybridDifferentiation

Focuseddifferentiation

Low price

Low pricelow added value

Strategies destined for ultimate failure

From Standardization to Specialization

Overall Corporate Strategy

Competitve Strategy

Functional Strategy

Strategies from SWOT Analysis

Steady Growth Strategy

SO: Support Business GrowthWO: Cooperate With CollegeST: CustomizationWT: Strengthen Competitive Status

Operations:Expand Business& Human Resource

Finance:Lower The Cost

Market:Online & Offline

1 2

3 4Customer Segments Strategic Goals

Enhance profiles Grow the business Maintain excellent service

The Strategy Clock


Solution: Financial & Implementation >> Strategy Overview

Strategy 1 >> Setting different prices for different levels of services & providing more choices for different groups with various demand.

2. The new pricing plan for traditional services boosts revenue

price SI service BP service form targeted customers

purpose

low

streamline &

standardize services

polish the existing plan

onlinecountry-wide entrepreneurs

who have basic knowledge

increase the units

highone-on-

one tutoring

customize and whole-

process guidance

offline

university students who are unfamiliar

with the process

increase the price

sales = P × Qlower price attracts more customers from the internet

higher price for higher service quality strengthens the profitability

1. Provide low and high price services to attract different customer groups

origin sales = P × Q = 500 × 10,200 = 5,100,000

higher P' × Q'= 1,000 × 1,500= 1,500,000

higher Q' × P'= 300 × 13,260= 3,978,000

total revenue for SI service= 5,478,000 7.41%

origin sales = P × Q = 800 × 8,900 = 7,120,000

higher P' × Q'= 1,200 × 1500= 1,800,000

higher Q' × P'= 11,570 × 500= 5,785,000

total revenue for BP service= 7,585,000 6.53%


Strategy 1 >> Further explore the potential market of SMM business

1. Extend the SMM service from advisory to agency to get more revenue

big platforms our company startup companies

no experience to negotiate with the big company

the cost of time and money is high

long term corporation

using AI to analyze

help them connect to

the platform

consult based on the data

offer lower price charge a commission

just providing consulting services is not enough.

2. Signing exclusive contracts to reduce the labor cost and improve the service quality

origin revenue = 1,000 × 2,000 = 2,000,000

expected revenue= 1,000 × 32,000 = 32,000,000

follow the assumption in case:the quantitives of services would grow at a speed of 60%（price remained the same) 60%

origin CM = ( P - VC ) × Q = 800,000

expected CM = 2,880,000CM ratio = price / unit CM = 60%

given the assumption :hire 20 exclusive consultantsfixed wages:80,000; variable commission:400

quite higher

260%


Strategy 1 >> Launch innovative financing services to earn more profit1. Providing overall services to help start-ups get financing

Coaching and training the entrepreneurial team

face-to-face meeting recording online classes invite some successful entrepreneurs to give

lectures and share their advice. explain the common mistakes of students in

starting a business, teach the development path and channels of a

start-up company introduce the important matters related to

investment and financing

Helping startup companies get financing

investors

startups

Help the startups get tickets to other official organizers' roadshows

Hold a simulated road show to provide students with the opportunity to polish their performance in road show

charge commission as our revenue


Industries and regions with a higher number of financing events represent greater potential

Focusing on startups in hot industries and regions makes it more likely that we can help companies raise capital and earn more commissions

Strategy 1 >> Launch innovative financing services to earn more profit

1. Providing overall services to help start-ups get financing

Coaching and training the entrepreneurial team Helping startup companies get financing

assumption: average amount of successful financing = 3,000,000 we charge 1% of financed amount as our commission considering this is a new business, we conservatively estimate the number of successful financing

is 50 per year we plan to hire 20 people and their fixed wage is 20,000 per year and they can get 15,000 as their

commission.

Insight:the new business creates another way to promote the sales so as to resist more intense competition in the existing market


expected revenue per year =1,500,000total labor cost = variable cost + fixed cost = 750,000 + 400,000=1,150,000CM ratio= CM / revenue = 50%Break even point = fixed cost / CM = 27

Strategy 2 >> Combine both online and offline channels to promote our brand effectively rather than the original reference program.

omni-channel:com

bination of online and offline

combination

Offline channels

Online channels

• Create a Q&A communication Forum• Optimize the website which is the most

original way of attracting customers• Make APP functions integrated and set

up multi-role login interface• Establish WeChat groups in the

customer's school

• Cooperate with some student organizations of the university

• Hold entrepreneurship competitions• Carry out free training lectures and

salons in universities & invite seniors to share experience

become sponsors of their activities to enhance the popularity among college students

encourage college students to carry out innovation and entrepreneurship, so as to obtain potential customers

accumulate brand reputation

interaction

audit system for quality control

Forum

Insert APP QR code for drainage

APP

website

Wechat

maintain customer base

, Open and transparent information real-time tracking of service progress online payment A two-way choice for investors and

entrepreneurs


Strategy overview >> New business model has a significant effect on future financial performance

marketing online & offline

get customersuniversity students

non-student

simplified incorporation

business proposal writing

trademark registration

patent certificate

basic services

social media marketing service

financing help

one package service creates more profit margin

big social media platform

small social media platform

lecture & tutor

road show

25%

fierce competition leads to low price strategy

problem solutionsetting lower price service to

ensure the market share

the trend of low price strategy and higher labor

cost leads to the poor financial performance

setting high price service with excellent service quality &

extended business line to ensure the profitability

high existing marketingexpense for reference fee

with low sales increase rate

using AI and big data technology to promote our brand is more

cost-effecient

solve the pain point of students is our differentiation


Implementation >> Five-year roadmap

Marketing• set up Wechat group in

targeted universities• build a Q&A forum• upgrade the version of APP• hold campus competition• optimize web page

Given moretime 1. Analyze the performance of new business to decide the future develop plans.

2. Explore the deep demand of clients and enlarge the targeted customers to get more profit.14

TimeTarget

Year 2019

H1 H2

Year 2020

H1 H2

Year 2021

H1 H2

Year 2022

H1 H2Priority

Optimize existing business sign up for cooperation with

big platforms develop technical team to

improve precision marketing improve the internal

management mechanism for consultants

Year 2023

H1 H2

Build new financing business• design some related courses• Seek investment channels for

cooperation• Find willing investors to

attend mock roadshows


Expected results

2019E 2018 2017 Revenue 17,763,000 14,220,000 12,610,000

Cost of sales:Labor Costs (9,305,500) (7,160,000) (6,480,000)

Platform (400,000) (2,000,000) (1,200,000)Total cost of sales (9,705,500) (9,160,000) (7,680,000)

Gross Profit 8,457,500 5,060,000 4,930,000 Expenses:Marketing (100,000) (500,000) (200,000)

Rent (540,800) (520,000) (500,000)Training (700,000) (400,000) (100,000)Interests (200,000) (200,000) (200,000)

Wages and admin (1,627,500) (1,550,000) (1,500,000)Total expenses (3,168,300) (3,170,000) (2,500,000)




1. Pro forma income statement including three years

Insight:We predict that the new strategy will change the landscape in 2018, with better cost management and a significant increase in revenue.

R 25 G62 B117

2019E 2018 MarginRevenue 17763000 14220000 3543000 24.92%

expense 2019E 2018 MarginLabor costs (9305500) (7160000) (2145500) 29.97%

Platform (400000) (2000000) (1600000) -80.00%

Marketing (100000) (500000) 400000 -80.00%

Training (700000) (400000) (300000) 75.00%

2019E 2018 MarginNet operating profits 4889200 1890000 2999200 158.69%

Revenue will go up by almost 25% due to SMM and new business

Gross margin ratio will be 45.36%, close to industry average level 45%




2. Pro forma income statement comparing two years

Labor costs 30%

hire more consultants

Platform costs 80%

capitalize the R&D expenseMarketing expense 80%

alter marketing strategy

Training expense 75%

improve our service qualitymain services' high quality costs more

cut down the cost of supporting activities

better cost structure



Expected results >> A financing plan for investors

SMM Financing

Labor cost’s difference(2018-2019) 1,680,000 1,150,000

Other expenses’ difference(2018-2019) 300,000

Total 3,130,000

1 Financing Plan

Focus on fund for the development of SMM and

Financing unit

Difference analysis

No given Balance Sheet——hard to estimate cash balance

2 Financing use

3 Feasibility analysis

Sustainable customer network

Revenue 25%

Service quality improvement

Accurate positioning of target customers

Customized and hierarchical service

Hire more exclusive consultants for SMM and Financing

Perfect staff training system

SMM>>steady growth

Financing>>strong start

Risk analysis

Risk MapClassification Solutions

A: Structure risks• Social media imposes

streaming restrictions.• Policy controls KOLs’

advertisements.

B:Operational risks• Privacy data violation• Complaint for low-quality

services about SMM

C:Competiton risks• Homogeneous sevices• Price war & Brain drain• less trust and loyalty to

USP’s KOLs than to other famous KOLs

Make a preliminary planand pay attention to the potential market timely

Review and update the online platfom regularly

Strengthen supervision of users' data protection

Compensate and improve

Optimize personalized and diverse services

Discount & lower cost Increase salaries Cut loss in time according

to sensitivity analysis


Risk identification >> Overview of Risk analysis

A: Structure

externalcircumstances

B:Operational

the process of operation

C:Competition

competitors & industry

D: Financial

cash flow deficit

Severity

High risk

probability

Medium risk

Low riskA

D

BC

Source: group analysis,information collected online

Lower DOL leads to less increase of EBIT when sales are increasing.

The risk is lower when the number of services

goes down


Margin of Safety Percentage

= ( Sales - BE dollars ) / Sales

MoS Percentage of SMM and T&F is much lower

these two businesses have more risk facing the

uncertain future

Break-even Point

= FC / ( Sales - VC )

new classification of business with different

prices makes some kind of services have lower

break-even point

lower risk

Semi-DIYNon-DIY

AdvancedBasic

Break-even PointMargin of Safety Percentage

Degree of Leverage = (Sales-VC) / (Sales-VC-FC)

3.14

4.63

1.50

0.000.501.001.502.002.503.003.504.004.505.00

2017 2018 2019

Degree of leverage

Risk identification >> Financial Risk Analysis using three accounting indicators

net operating income in grids of this kind of light blue color is higher than the previous one

acceptable

Single factor sensitivity coefficient : The extent to which a change in an independent variable results in a change in the dependent variable, assuming that all other factors remain unchanged

Units(SMM)

PriceFC

Units(T&F)

Price(SMM) Units(T&F)


Risk identification >> Sensitivity Analysis offers the vary range of different variables that we should pay attention to

1. We recognize some critical risk points with the help of SENSITIVITY ANALYSIS, for the purpose of implementing COSO FRAMEWORK

320000 2880 3040 3200 3360 35201100 416000 528000 640000 752000 8640001050 272000 376000 480000 584000 6880001000 128000 224000 320000 416000 512000950 -16000 72000 160000 248000 336000900 -160000 -80000 0 80000 160000850 -304000 -232000 -160000 -88000 -16000

35000 35 40 45 50 6026000 -15000 40000 95000 150000 26000027000 20000 80000 140000 200000 32000028000 55000 120000 185000 250000 38000030000 125000 200000 275000 350000 50000032000 195000 280000 365000 450000 62000034000 265000 360000 455000 550000 740000

320000 900 950 1000 1050 11001360000 240000 400000 560000 720000 8800001440000 160000 320000 480000 640000 8000001520000 80000 240000 400000 560000 7200001600000 0 160000 320000 480000 6400001680000 -80000 80000 240000 400000 5600001760000 -160000 0 160000 320000 4800001840000 -240000 -80000 80000 240000 400000

350000 45 50 55 60 65350000 325000 400000 475000 550000 625000360000 315000 390000 465000 540000 615000400000 275000 350000 425000 500000 575000410000 265000 340000 415000 490000 565000420000 255000 330000 405000 480000 555000470000 205000 280000 355000 430000 505000480000 195000 270000 345000 420000 495000

The net operating income from a combination of different prices and sales

The net operating income from a combination of different fixed costand units

SMM T&Fprice 10 4sales 6 2VC -4 -2FC -5 -1

The most sensitive variable: price, The least sensitive variable: variable wages for the staffsSo price war in the industry will largely threaten our NOI

Identified risk from sensitive analysis• Decrease in unit service prices of SMM and T&F• Increase in fixed salaries of consultants

if NOI within acceptable level

if NOI lower than previous one

Follow the trends of market: decrease unit service price increase fixed salaries Communicate with related

consultants ,understand and try to satisfy their needs considering theri performances

Cease the operation of that serviceCUT LOSSES IN TIME

Find new business model to adapt to the new market and industry environment

Coping measures in daily operation Check accounts and cash flows regularly in case

of cash drain Choose financing methods wisely and timely to

prevent funding gaps and credit risk

Risk identification >> Risk analysis under the COSO frameworkCase Overview ►Current situation & issues ►Solution: Financial & Implementation ►Expected results ►Risk ►Summary

Risk Accessment

Control ActivitiesControl Environment

Information and Communication

COSOMonitoring

Build a overall control environment to lower down the risk probability

Form a mature risk accessment system to identify the risk timely

Current situation Key strategies & initiatives Risks Mitigation

Find the painpoints of customers and build our own differentiation

Industry situation• Huge demand for startup services• Low entry barriers & fierce competition• Declining geographic concentration

Financial situation• Higher financial risk• A significant decrease in profitability• Problems with cost management• BP has greater contribution

• A startup service provider mainly focused on college students

• Huge market but also fierce competition• Problems with profitability

Macro-environmental • Policy support & entrepreneurial intention• Rapid and sustained economic growth• Advanced technology accelerate startups

15

• Improve enterprise financial performance• Enhance brand recognition, image and memory

along whole consumer decision journey• Get second seed funding from investors

Brand position• Tailored service for the needs of startups• Differentiate by solving the pain point of students• Provide hierachical service for different needs

Marketing strategy• Set up Wechat groups in targeted universities• Hold campus competition• Construct a forum&optimize APP and web page

Channel optimization• Build an online and offline cycle• Cooperate with universities closely for new clients• Optimize APP and web using experience• Build community on social media like WeChat

Loyalty management• Implement full lifecycle consumer management• Accelerate customer complaint response• Build long-term good relationships with clients

• Structure Risks• Operational Risks• Competition Risks• Financial Risks

Structure Risks• Social media

imposes streaming restrictions.

• Policy controls KOLs’ advertisements.

Operational Risks• Privacy data violation• Complaint for low-

quality services about SMM

Competition Risks• Homogeneous

sevices• Price war & Brain

drain• less trust and loyalty

to USP’s KOLs than to other famous KOLs

Financial Risks• Cash Deficit

• preliminary planning

• Technology maintain and update

• Optimize diverse services

• Increase consultants' salaries and sales prices of unit service in a limited amount

• Cut loss in time—Stop the strategy which is more likely to lead to cash deficit and credit risk


Summary >> Our report not only suggests new directions for existing corporate problems but also assesses risks for the new strategy

Company situation• Specific target customers• Specialized service• Low customer satisfaction

Documents

2020 IMA Business Case Competition