Business Plan Graphic Design Company

Business Plan For A Graphic Design Company

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Table of Contents

1. Executive Summary 1Business OpportunityProduct/Service Description

2. Company Background 3

Business DescriptionCompany History

3. Business Plan For A Graphic Design Company 5

4. Services 6

5. The Industry, Competition, and Market 7

Market DefinitionPrimary CompetitorsCustomer Profile

6. Marketing Plan 10

7. Financial Plan 12Investment PlanBreak-even AnalysisLiquidity PlanEarnings PlanRisk Analysis

8. Conclusion 19

Business Plan For A Graphic Design Company 1

1. Executive SummaryThe company develops graphic design products for private and business customers. It alsoprovides a source for legal and free graphic products for private customers. It is possible todownload graphics from different categories. The pricing policy provides unlimiteddownloads for all business members. The platform also enables other members to distributeand promote their media products.

Profits are from development and product sales. The revenues of the first year are between$150,000 and $250,000.

The goal of this start-up is the operation of a graphic design company. The expected numberof customers is between 120,000 and 150,000.

1.1 Business OpportunityThe company expects that the picture and media industry is undergoing significantchange, with the primary means of distribution transitioning from physical formats todigital formats accessed over the internet and wireless and cable networks.

The company intends to become a leading supplier of graphic design services andproducts over the internet. The company also plans to continue to pursue and expandrelationships with leading distributors in each of the media product categories and in newproduct categories, to establish joint ventures and strategic relationships with major firmsand service providers, and to enter into arrangements with other e-commerce companies.

Through the company's online media platform, it will provide consumers with access tographic design products and software tools. In addition, the company provide a platformfor content owners to make their content available to consumers at five design stores withminimal effort on their behalf. In order to offer an "end-to-end" person-to-person graphicexchange trading service, the company intends to offer a variety of pre- and post-graphicdevelopment services to enhance the user experience.

The company expects to enter into marketing agreements with certain consumer or retailcompanies and large e-commerce companies in order to market the digital graphicsdirectly to consumers.

The company intends to pursue a strategy aimed at delivering sustainable growth inearnings and company value. The company expects that the highly fragmented onlinemedia market and its anticipated growth provide an opportunity for expanding thecompany’s business and increasing its overall market share. The key strategies of thecompany are to:

increase the number of customersmake strategic investmentsimprove service and product quality


1.2 Product/Service DescriptionThe company intends to become a leading supplier of graphic design products andservices as well as media and entertainment products over the internet. The companygenerates revenues primarily through selling products and services.

The company plans to develop more than 500 graphic products per month. It will alsobuy the exclusive rights for more than 1,000 graphic products.

The internet and mobile technology now make it economically feasible for graphic storesto make virtually an unlimited number of high-quality products available to consumersfor purchase at any time. Sophisticated online search tools permit consumers to identifyand purchase many previously inaccessible graphic products.

Figure 1.1 shows the distribution of revenues.


2. Company BackgroundThe internet offers for the first time the opportunity to create a global marketplace for digitalgraphic development and downloads.

The company develops graphics and provides several graphic design services. The futureperformance of the business depends on the successful and timely development, introductionand market acceptance of new and enhanced products. The life cycles of the products andservices are difficult to predict because the market for the products is new and emerging, andis characterized by rapid technological change, changing customer needs and evolvingindustry standards.

The company makes its basic properties like graphics, pictures, information, search engine,media content available without charge to users and generates revenue primarily through thesale of downloads. Additional advertising on the platform is sold through the company'sinternal advertising sales force and third-party agents.

2.1 Business DescriptionThe company's performance is substantially dependent on the efforts and performance ofits senior management.

The company has a strong management team with significant experience in the onlineindustry, the leisure and entertainment sector, information technology, paymentprocessing, media, e-commerce and customer support.

2.2 Company HistoryThe company was incorporated in 2004. The company begins commercial distribution ofthe services in the fourth quarter of 2006.

The fiscal year of this company is the calendar year and the duration of the companybegan in 2004 and is unlimited.

The company plans to have 20 employees in the first business year. Competition forqualified sales, marketing, and technical personnel is intense as these employees are inlimited supply, and the company might not be able to hire and retain sufficient numbersof such personnel to grow the business. The company plans to substantially expand thesales operations and marketing efforts, both domestically and internationally, in order toincrease market awareness and sales of services and products. The company will alsoneed to increase technical staff.

Figure 2.1 shows the current distribution of labor costs for each segment.



3. Business Plan For A Graphic Design CompanyThe company intends to become a leading supplier of graphic design products and servicesas well as media and entertainment products over the internet. The company generatesrevenues primarily through selling products and services.

The company plans to develop more than 500 graphic products per month. It will also buythe exclusive rights for more than 1,000 graphic products.

The internet and mobile technology now make it economically feasible for graphic stores tomake virtually an unlimited number of high-quality products available to consumers forpurchase at any time. Sophisticated online search tools permit consumers to identify andpurchase many previously inaccessible graphic products.


4. ServicesIn order to increase traffic to the company's web sites, increase revenues and to extend thebrand internationally, the company seeks to enter into strategic relationships with businesspartners who offer similar content, technology and distribution capabilities as well asmarketing and cross-promotional opportunities.

The market in which the company competes is characterized by rapidly changing technology,evolving industry standards, frequent new service and product announcements, introductionsand enhancements and changing customer demands. This means that a core focus will beplaced on the detection of new trends and the development of new services.

The company plans to expand its operations by developing and promoting new andcomplementary services, products or download formats and expanding the breadth and depthof services. This will increase revenues in the long run.

The company also plans to enter into co-marketing and service agreements with certaininternet, consumer and retail companies in order to offer new services for the customers andfind new customers.


5. The Industry, Competition, and MarketA careful analysis of the market and competitive forces in this industry is a key element inassessing the business potential of the project. This analysis will provide marketing and salesdata that are indispensable to optimally develop the business potential. Market is defined asthe market where the company plans to operate in the next four years.

5.1 Market DefinitionThe graphic industry involves the production and distribution of graphic services andgraphic products. Production involves the development and physical production ofpictures, posters and additional media products. Distribution involves the domestic andinternational distribution. The major producers have leading industry positions based onthe number of products that they release. The major producers are generally part of largediversified corporations with production and distribution operations and establishedrelationships with creative talent and others involved in the industry.

The growth of the Internet, the proliferation of advanced digital media and theadvancement of communications infrastructure have fundamentally changed the waymedia products can be distributed and shared. According to several research institutes, in2004, there were over 273 million online households worldwide. Of these households,approximately 127 million were accessing the Internet through broadband connections,while the majority continued to access the Internet through dial-up connections. Dial-upconnections provide transmission rates of up to 56 Kbps, allowing for basic applicationssuch as e-mail and low bandwidth Internet access. Comparatively, most of the 127million households accessing the Internet through broadband connections were utilizingfirst generation broadband, such as DSL, ADSL or cable modems, for faster downloadingof data. Today, consumers and businesses are increasingly demanding access to advanceddigital media, video, communications and interactive broadband applications.

Industry sources report that digital graphic design products increased to 6% of the totalgraphic market during the first half of 2006, and project that the digital picture segmentwill represent approximately 25% of all picture sales in 2010.

Figure 5.1 shows average growth figures in revenues of all available companies in thespecified market during the past five years. Despite slowing global economic growth ingeneral a lot of companies with an international focus and new services have experiencedconstant growth rates of more than 35%. For 2005 a growth rate of 40% is expected withstrong development in the third and fourth quarters.


5.2 Primary CompetitorsThe company currently faces measurable competition from other media production andinternet distribution companies. The local industry is comprised of a few large,well-known companies, several mid-sized companies like this company, and a largenumber of relatively small independent companies. Several new companies haveemerged producing similar services. Competition might come from the use of existingtechnologies and also from the development of new services. To further examine thecompetitive environment it is necessary to define the players in that environment. Figure5.4 shows the size of businesses in this market segment. The numbers are based onaverage revenues of companies that run their business more than five years.

The company believes that the products and services are not easily substitutable with theproducts of the competitors due to the level of technology, but nonetheless the companymust constantly maintain the technology developments.

5.3 Customer ProfileThe company markets and sells the products worldwide through a combination of its owninternet platform and third-party internet provider to all kinds of customers. This includes


private and business customers. Figure 5.2 shows the demand for the described services.Numbers are based on average revenues per customer of a particular group multiplied bythe number of customers in the respective group. This gives total demand share pergroup.

Figure 5.3 shows revenues by yearly income of private persons. The figure showsrevenues generated per income group. Numbers are based on the average income percustomer and the number of customers per income group. As can be seen customers inthe middle income segment generate the highest revenues. High-use, low-income groups,such as students, generate relatively low revenue streams.


6. Marketing PlanEffective marketing together with consistent promotion are the keys to success online. Thecompany focuses on a comprehensive web marketing and classical marketing strategydesigned to attract new customers, convert leads into sales, and maximize the revenue. In thestart-up phase it is a central task of the marketing concept to establish a name recognition andits own trade mark. Several marketing and sales promotion strategies are available in theonline industry. Figure 6.1 shows different marketing elements and their use in marketingstrategies as well as their estimated potential success factor. Later on, the strategy willprimarily be targeted to gain new customers and create customer loyalty of repeat customers.The figure can serve as a direction for the planning of a marketing and sales promotionstrategy. The numbers are based on comparable businesses.

The sales team is responsible for identifying and qualifying new customers, selling theproducts and services, identifying cross-selling and education opportunities, and assistingwith product training. In addition, the sales team is responsible for building internal andexternal awareness related to new product offerings.

Online marketing: The internet is a complex medium and it offers tremendous scope foradvertising and business promotion especially for online-based companies. The company hasthe budget and strategy that allows it to use dozens of traffic providers to link to its core website. It carefully tracks not only expenditures but also the ROI from each source.

Print advertising: Newspaper advertising is an integral and desired part of the marketingstrategy. Print media advertising is a mass communication tool. Printed advertisements willbe used in national and international magazines to increase the number of customers.

Marketing cooperation: The best way to find out who would make a good partner is toresearch the potential businesses in the industry.

Sales promotion: Sales promotion strategies have temporary effects only. Sales promotionwill be used for a limited time to increase the number of customers. The strategy will includespecial offers with opening discounts for new customers. The initial prices will be reducedby 50% for the first three months. This strategy is expected to continue for one to two years.

Direct marketing: The company uses direct marketing campaigns with e-mail and mailinglists as well as newsletters. This strategy will be used to increase the revenue per customer.Since spreading costs of such mailings are very low this marketing element provides a usefuland efficient tool. On the other hand, acquiring data about customers and prospects will betime consuming and expensive.



7. Financial PlanThe financial plan is the key factor for the success of a business start-up. Investors and bankswill base their funding decision on the information given in this plan. Besides a plan of thefinancial needs, this plan must insure that the business is always liquid and ultimatelyprofitable. Since the sales and earnings projections in the business plan are based onexpectations, the financial plan has to be revised and refined on a constant basis so thatdiscrepancies can be uncovered and instantly solved. The inputs for this financial plan arebased on other companies that serve as a group of comparable firms as well as the company'sown estimates based on the planned business environment. Revenue estimates areconservative and expense projections include a cushion for unforeseen contingencies. Allfigures are refined by statistical simulations.

The most important features of the financial plan and the financial strategy can besummarized by the following points.

Cost of revenues consists of the direct expenses associated with the image processing. Inaddition, cost of revenues include transaction fees paid to distribution partners. Sales andmarketing expenses consist primarily of salaries for marketing, sales, business developmentand field operations personnel. Sales and marketing expenses also include commissions andrelated benefits for sales personnel and consultants, traditional advertising and promotionalexpenses, trademark licensing and sponsorship or carriage fees paid to affiliates. General andadministrative expenses consist primarily of fees for professional services, general officeexpenses, salaries and related benefits for administrative and executive staff, as well asoccupancy expenses. Research and development expenses consist primarily of personnelcosts, contracted product development, and Internet service provider fees.

The initial capital requirement is estimated to be $250,000 to $300,000. This is comparableto other businesses in the segment. There will be further capital requirements in thefollowing years. The company anticipates making capital expenditures in the ordinary courseof business of approximately $1.5 million in the balance of 2007, which includesimplementing a customer management and administration system at an estimated cost of $0.9million.

The company is exposed to fluctuations in interest rates. It actively monitors thesefluctuations and uses different derivative instruments from time to time to manage the relatedrisk. In accordance with the risk management strategy, it uses derivative instruments only forthe purpose of managing risk associated with an asset, liability, committed transaction, orprobable forecasted transaction that is identified by management. The use of derivativeinstruments may result in short-term gains or losses and may increase volatility in earnings.

The company anticipates that operating expenses generally will remain stable in line withrevenue growth.

Depending on the initial investment sum, cost and revenue estimates vary. Figure 7.1 showsthe expected relationship of cost and revenues.


The details of the financial plan are laid out in more detail as follows:

Section 7.1 gives an investments schedule. This includes all investments necessary during thestart-up phase.

Section 7.2 gives a break-even analysis that shows revenues at the break-even point. Everyadditional sales dollar adds to profit and vice versa.

Section 7.3 gives a liquidity plan. This plan is based on current cost and revenue estimatesfrom Section 7.2. Liquidity must always be positive.

Section 7.4 contains a long-term profit projection for the first four years of business. Theprojection shows that the critical amount of revenues at which the business is profitable andhow profit develops over time.

Section 7.5 provides a risk analysis. The risk analysis contains critical factors that mayimpact the financial numbers presented in this plan.

7.1 Investment PlanThe investment plan lists primary capital needs for the foundation and operation of thebusiness. The plan also includes initial marketing and sales promotion expenses. Thefigures are based on comparable businesses.


7.2 Break-even AnalysisThe break-even analysis shows how earnings rise as a function of sales. The break-evenpoint is the point at which revenues from sales cover total costs (fixed costs and variablecosts rising with sales). This analysis is important for the development of the liquidityplan and the pricing policy. If the break-even point is not achieved in the long run, thebusiness loses liquidity and may become insolvent. This requires that a critical amount ofrevenues must be generated.

At a sales revenue of $700,000 and given total costs the business will begin to generate aprofit. Fixed costs of this business are estimated at $100,000 to $200,000 and variablecosts are estimated at $500,000. In this case, fixed costs are expenses that do not varywith sales volume. These costs have to be paid regardless of sales. Variable costs varydirectly with the sales volume.

At an estimated revenue of about $1,900,000 after two to three years profits are expectedto rise to $130,000. This represents a revenue margin of about 7%. These estimates arerealistic in this market segment and comparable to similar businesses.


Increasing sales volume will increase pre-tax earnings margins but this developmentreverses when administrative costs begin to rise sharply. Up to a sales volume of$3,000,000 earnings margins rise to 9.5% after which the margin decreases to constant8.5%.

Figure 7.2 shows at which critical sales volume the business generates a profit. Thisserves as a base for a business and pricing strategy. Additionally the graph shows theamount of sales at which a marketing campaign can be run profitably.

7.3 Liquidity PlanThe liquidity plan shows the amount of finances necessary to assure permanent liquidityof the complete business. The liquidity plan is based on four representative months of atypical business. Revenue estimates and costs are simulated from a standard normaldistribution. Cash is constant at $1,000 for every month.


7.4 Earnings PlanThe earnings plan shows the results from ordinary operations. The plan is based on thefirst four years of business. Revenue estimates are drawn from a normal distribution witha strong estimated growth rate. Figure 7.3 shows net income.


7.5 Risk AnalysisThe risk analysis considers critical factors that may lead to a failure of the businessconcept. Such factors can involve failures during the implementation phase as well asduring operations. Such potential factors are numbered according to the probability atwhich they can arise. Shown are the key factors that led to the failure only. Data aredrawn from surveys from 12 businesses with different services as well as revenue andcost structures.

1. The revenue comes from the sale of graphic design services and products over theinternet and wireless and cable networks, which is subject to unauthorized consumercopying and widespread dissemination on the internet without an economic return.Global piracy is a significant threat to the media industry generally. Unauthorized copiesand piracy have contributed to the decrease in the volume of legitimate sales of mediaproducts and have put pressure on the price of legitimate sales.

2. The company plans to increase the operating expenses to expand the sales and marketingoperations, develop new distribution channels, fund greater levels of research anddevelopment, broaden professional services and support and improve the operational and


financial systems. If the revenues do not increase as quickly as these expenses, theoperating results may suffer.

3. The market for internet-based graphic solutions is new and rapidly evolving. Thecompany expects that it will continue to need intensive marketing and sales efforts toeducate prospective customers and partners about the uses and benefits of the productsand services.

4. A change of the business process could result in increased expenses or delays incommercialization and therefore could delay revenues and adversely affect our futureoperating results.

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

6. The future success of the company will also depend in large part on the ability to attractand retain highly qualified service and management personnel. The company facescompetition for personnel from other companies, academic institutions, governmententities and other organizations.

7. Behavior of Competition: Due to low entry barriers additional businesses can enter themarket at low cost. Approximately 16% of insolvent businesses were driven out of themarket by that competition. A better service concept, innovative ideas and concentrationon core businesses are an easy means for an entrant to gain a competitive edge.

8. The company has never generated positive annual cash flow from the core operatingactivities, and it may not generate nor sustain positive cash flows from operations in thefuture. The ability to generate sufficient cash flow will depend on the ability tosuccessfully develop new services and to sell these services.

9. Insufficient demand and customer loyalty: This frequently leads to business failure. Thisincludes permanently low demand, as well as a temporary collapse in demand. Oftendemand estimates were too optimistic at the outset. Such failures might also come fromexternal shocks instead of operating deficiencies. Approximately 25% of businesses withinsufficient demand go bankrupt. Since the expected frequency of business demandduring the start-up phase are still low, a critical success factor is to focus promotionaleffort so as to generate customer loyalty early on, which will help minimize the effects ofdemand fluctuations. This is also important for the future development of the business.


8. ConclusionThe company expects that the graphic industry is undergoing significant change, with theprimary means of graphic distribution transitioning from physical formats to digital formatsaccessed over the internet and wireless and cable networks. This is occurring as a result ofthe popularity and proliferation of personal computers and digital platforms.

The company plans to become a leading publisher in the field of graphic design and graphicproduction. With world-class creative talent, a strong and experienced management team andadvanced graphic, picture and media production technology and techniques, the companymakes high quality products for a broad audience. Based on the knowledge of the industryand the announced release schedules of the competitors, the company expects to have a goodproduct portfolio.

For distribution a professional platform with the newest technology is essential. This is thechance for new businesses with innovative ideas and new offerings to secure a largecustomer basis. Service and technology are factors that can earn a competitive edge.

For a successful operation of a graphic design production company 4 factors are critical andcentral to the business strategy:

Cost management is a critical success factor for businesses in industries where margins arelow. The expected margin for one product is between 3% to 5%.

The company intends to continue to devote significant resources to technology developmentin order to introduce new products.

The company believes that acquisitions of complementary technologies may allow to expandthe product offerings.

Service is very important. This will secure customer loyalty and optimize profitability in amarket that is very competitive. The expected costs for additional services activities arebetween 5% to 10%. On the other hand the expected additional growth rates due to newservices activities are between 8% and 12%.

The distribution is based on its own online platform.

The number of graphic design templates has to be between 100 and 250 to meet therequirements of the customers.

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Business Plan Graphic Design Company