Computers Reseller Business Plan

8/8/2019 Computers Reseller Business Plan

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Computers Reseller Business Plan

Executive Summary

Crest Systems is a new Value Added Reseller (VAR). The company is focused on marketing speciality inventory

software products to over 1,200 VARs that sell in vertical markets. Each market is dist inct and serves a particular

speciality industry. In addition to the software, Crest will sell the inventory data collection hardware that willoperate the software. Traditionally, VARs who sell to these vertical markets focus solely on the industry's unique

product line or service. Though their customers have inventory controls needs, these VARs have not had a

product they could offer until now.

Critical to the product's success is the ability to sell the customer an inventory management solution that costs

less than $5,000. Crest Systems has signed a strategic alliance agreement with Promerit Engineering to sell its

software products through these VARs. The first product is Promerit Inventory Basic and will be released in May.

Crest Systems projects sales of 20,000 units in 36 months. The product will sell for $850.

The VAR will receive $400 from the sale. Crest Systems will receive $250 on the sale of each unit. Crest

Systems will also sell hardware that will use the software. Crest Systems will sell portable data collection units

from Symbol and PSC. The cost of the hardware will be between $2,000 to $3,200 per unit. Crest Systems

receives between $600 - $900 on each unit. The total package of software and hardware will be less than $5,000.

Though the company is focused on the vertical markets, VARs who sell warehouse are also interested in a low-end data collection solution. Crest Systems will assemble 1,000 plus warehouse management VARs to sell

Promerit Inventory Basic.

Crest Systems will also develop specialty software modules that can be integrated with Promerit Inventory Basic

software. These modules will sell for $800 to $1,000. Crest Systems plans to solidify a strong business

relationship with its VARs customers that will lead to providing additional software and hardware products.

Richard Torres, owner of Crest System, has over twelve years of experience selling to vertical markets. Last

year, he was Cycon Systems top salesperson with over $3 million in sales.

1.1 Objectives

The objectives of Crest Systems are to:

y Sell 8,000 units during the first year.

y Establish strong relationships with the VARs critical to sales.

y Build the software module business by 15% each year.

y Maintain effective communication with Promerit Systems in order to improve product quality and customer

satisfaction.



1.2 Keys to Success

The keys to success in Crest Systems are:

1. Offering inexpensive inventory control solutions that cost less than $5,000 to implement.

2. Reliable and timely response to VARs' questions and requests.

3. A reliable administration that is ready to serve VARs, prepare accurate billing, follow-up on orders and other

documentation, and maintain a close watch on expenses and collection of accounts receivable.

Company Summary

Crest Systems is a Value Added Reseller (VAR) that is focused on selling low-end inventory software and

hardware products. The company markets Promerit Engineering software products to over 1,200 VARs that sell

products in vertical markets. In addition, Crest Systems will market the software product to warehouse systems

VARs who are looking for a low-end inventory software product.

2.1 Company Ownership

Richard Torres is the owner of Crest Systems. The company will be set up as a C Corporation. It is expected that

this form of incorporation will allow room for growth and be an effective vehicle for acquiring additional capital in

five to seven years.

2.2 Start-up Summary

The start-up cost of Crest Systems will consist primarily establishing an account receivable system and

communication system for salespeople. Richard Torres will invest $50,000. He will also secure a $100,000 loan.

Start-up

Requirements

Start-up Expenses

Legal $1,000



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P d

Y

rest Systems' products are as f ollows:

y Promer it Inventory Basic.

y Software modules that integrate Promer it Inventory Basic.y Data

̀

ollection a ardware.

We have a team of exper ienced and proven salespeople in marketing a company's products to VAb s that serve

ver tical markets.

Market A al i S mmary

There are thousands of small businesses that are dissatisfied with the choice of inventory control products that

are available to them.c ost of these businesses exist below the water line f or software companies. Selling to a

market that can only spend d

e

,f f f

on an inventory control solution is considered too small a return f or the sales

activity.

If a salesperson can spend a day winning a d

e f

,f f f

contract rather than a d

e

,f f f

contact, she will disregard the

smaller oppor tunity.c any sales organizations have over looked this oppor tunity. If a cost eff ective method can be

established to attack this market, the sales can be enormous.

It is g

rest Systems plan to sell to the VAh s that serve the ver tical markets as well as the VAh s that sell

warehouse products and services.g

rest Systems will sell the hardware directly to customers when the software

is purchased by the ver tical VAh s' customer . The company will use this oppor tunity to build purchasing

relationships with businesses with growing inventor ies.

4. Market Segmentati n

g

rest Systems will f ocus on two customer groups:

y Warehouse Products and Services VAi s: These VAi s off er warehouse management hardware and

software. Though their pr imary f ocus is on larger contracts, an inexpensive product f ocused on the low end

of the market will be attractive if the payoff is large enough. The VAi s retain

p

q r r

on each product sold.

There is no other software product that is f ocused on our target customers that rewards better f or the sale.

y Ver ticals arket VA

i s: These VAi s traditional don't sell inventory management products to their customers.

Inventory control products are not their f ocus, rather it is whatever item or product par ticular to that industry

that is used in manuf actur ing or assembly of their final product. Yet they have thousands of customers. If

the payoff is large enough, their access to the market would lead to enormous sales. Like the warehouse

product VAi s, the ver tical market VA

i s would retain p

q r r

on each product sold.



Markett

nalysis

Year 1 Year 2 Year 3 Year 4 Year 5

Potential Customers Growth CAGR

u

arehouse Products VARs 15% 1,400 1,610 1,852 2,130 2,450 15.02%

Vertical Market VARs 15% 1,100 1,265 1,455 1,6v 3 1,924 15.00%

Total 15.01% 2,500 2,8v 5 3,30

v 3,803 4,3

v 4 15.01%

Strate y an Implementation Summary

Crest Systems will aggressively market Promerit Inventory Basic to VARs. It is our belief that the payoff to the

VARs on each sale will make the product attractive.w

e will train their salespeople so that they will be successful

in demonstrating the products to customers. This will be especially important with vertical market VARs that will

not normally offer software products to their customers.

5.1 Competitive E e

Richard Torres is the competitive edge of Crest Systems. Richard has worked for Cycon Systems for the past ten

years. He served as the company's manager of sales to vertical market VARs.

x

uring the past five years Richard was responsible for over $15 million dollars worth of sales to vertical market

VARs. His strength is his customer relation skills and he has been successful in expanding the number ofvertical

market VARs that bought Cycon System products.

Another competitive edge for Crest Systems is the ability to create specialiy

ed software modules for customers

that will customiy

e the software. he company believes that one fourth of all software customers will request a

customiy

ed module to be added to the software after purchase.

5.2 Sales Strate y



Crest Systems' sales strategy is to take the first 60 days of operation to train VARs and put the resources in

place to facilitate sales.

e anticipate that sales will begin during our third month of operation.

5.2.1 Sales orecast

The following is the sales forecast for the next three years.

Sales orecast

Year 1 Year 2 Year 3

Sales

Promerit Inventory Basic $1,450,000 $1, 00,000 $2,000,000

Hardware $909,000 $1,200,000 $1,500,000



Software odules

, ,

,

ther

Total Sales

,

, , , ,7

,

Direct ost of Sales Year Year

Year

Promer it Inventory Basic , 7, ,

, ,

,

ardware , 77 , ,

Software odules

ther

Subtotal Direct ost of Sales

,

7,

,

7

,

,

,

Management S mmary

ichard Torres will manage the day to day operations of

rest Systems.

6. Personnel Plan

The personnel plan f or

rest Systems is as f ollows:

y anager;

y Accounts anager;

y Sales Staff

);

y Software Engineer ).

rest Systems anticipates that another software engineer will be hired in September of this year .

Personnel Plan

Year Year

Year j

k anager l m n , n n n l 7 n , n n n l o n , n n n

Accounting k anager l

, n n n l

, n n n l

m , n n n



Sales Staff $180,000 $200,000 $230,000

Software Engineers $85,000 $100,000 $104,000

Other $0 $0 $0

Total People 0 0 0

Total Payroll $36 ,000 $414,000 $460,000

Financial Plan

The following is the financial plan for Crest Systems.

7.1 Break-even nalysis

The monthly break-even point is shown below.

Break-even

nalysis

Monthly Revenue Break-even $143,3

3

Assumptions:

Average Percent Variable Cost %



Estimated Monthly

ixed Cost $4 ,311

7.2 Projecte Profit an Loss

The following table and charts will highlight projected profit and loss for the next three years.



Pro Forma Profit an Loss

Year 1 Year 2 Year 3

Sales $2,488,000 $3,080,000 $3,

20,000

irect Cost of Sales $1,66

,000 $1,9

0,000 $2,330,000

Other Production Expenses $0 $0 $0

Total Cost of Sales $1,66 ,000 $1,9

0,000 $2,330,000

Gross Margin $821,000 $1,110,000 $1,390,000

Gross Margin % 33.00% 36.04% 3 .3

%

Expenses

Payroll $36

,000 $414,000 $460,000

Sales and Marketing and Other Expenses $120,000 $160,000 $200,000

epreciation $0 $0 $0

Leased Equipment $0 $0 $0



Util ities $1,680 $1,680 $1,680

Insurance $0 $0 $0

Rent $24,000 $24,000 $24,000

Payroll Taxes $55,050 $62,100 $69,000

Other $0 $0 $0

Total Operating Expenses $56 ,

30 $661,

80 $

54,680

Profit Before Interest and Taxes $253,2

0 $448,220 $635,320

EBIT A $253,2

0 $448,220 $635,320

Interest Expense $8,903 $6,962 $4,936

Taxes Incurred $

3,310 $132,3

8 $189,115

Net Profit $1 1,05

$308,881 $441,269

Net Profit/Sales 6.88% 10.03% 11.86%

7.3 Projecte Cash Flow

The following table and chart highlight the projected cash flow for three years.



Pro For ma z

ash Flow

Year { Year |

Year }

~ ash eceived

~ ash f rom

perations

~ ash Sales

| |

, 77 , } ,

~ ash f rom eceivables { , } } , {

|

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Additional ~ ash eceived

Sales Tax, VAT, ST/ ST eceived

New ~ urrent Borrowing

New ther Liabilities interest-f ree)

New Long-term Liabilities

Sales of ther ~ urrent Assets

Sales of Long-term Assets

New Investment eceived

,

Subtotal ~ ash eceived

|

, { , {

|

|

,

|

,

} } ,

|

, {

Expenditures Year { Year |

Year }

Expenditures f rom perations



Cash Spending 7,

,

,

Bill Payments

,

,

,

,

,7

,7

Subtotal Spent on perations , ,

,

, ,

,7

Additional Cash Spent

Sales Tax, VAT, ST/ ST Paid ut

Pr incipal epayment of Current Borrowing

ther Liabilities Pr incipal epayment

Long-term Liabilities Pr incipal epayment

,

,

,

Purchase

ther Current Assets

Purchase Long-term Assets

Dividends

Subtotal Cash Spent

, ,7

, ,

,

,

Net Cash Flow , ) 7, 7

,

Cash Balance

, ,

, 7

7.4 Pro jected alance Sheet

The f ollowing table highlights the pro jected balance sheet f or three years.

Pro For ma

alance Sheet

Year Year

Year

Assets



Current Assets

Cash

,

,

,

7

Accounts eceivable , 7 ,

,

ther Current Assets

Total Current Assets 7,

,

,

,

Long-term Assets

Long-term Assets

Accumulated Depreciation

Total Long-term Assets

Total Assets

7,

,

,

,

Liabilities and Capital Year Year

Year

Current Liabilities

Accounts Payable 7,

,7

, 77

Current Borrowing

ther Current Liabilities

Subtotal Current Liabilities 7,

,7

, 77

Long-term Liabilities 7 ,7

,

,

Total Liabilities 7,

7

,

7 ,



Paid- in Capital , ª ª ª , ª ª ª , ª ª ª

« etained Earnings

¬ ,

- ª ª )

®

̄

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7

̄

- ,

- °

Earn ings 7 , ª ® 7 - ª ° , ° °

¯ ̄

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²

Total Capital

±

7 ª ,7 ® 7 ® 7 ² , - ° , ª

±

ª , ² ª 7

Total Liabilities and Capital 7, ² °

̄

° -

±

, °

±

,±

² , ° ®

Net Wor th

±

7 ª ,7 ® 7 ® 7 ² , - ° , ª

±

ª , ² ª 7

7. siness atios

Business ratios f or the years of this plan are shown below. Industry profile ratios based on the Standard Industr ial

Classification ³ SIC) code ́

µ ¶ ́

, Computers, per ipherals and software, are shown f or compar ison.

· atio Analysis

Year

Year ±

Year -

Industry Profile

Sales ̧ rowth ª . ª ª %±

- .7 ² %±

ª .7 ° % ® . ° ª %

Percent of Total Assets

Accounts « eceivable ° ª .± ±

% 7 ² . ® %

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. ª

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¹ ther Current Assets

ª .

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ª .

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ª .

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.

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Total Current Assets ª ª . ª ª % ª ª . ª ª % ª ª . ª ª % ° . ° ª %

Long-term Assets ª . ª ª % ª . ª ª % ª . ª ª % - .±

ª %

Total Assets ª ª

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%

Current Liabilities ̄

7.® -

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±

%

7.

² - %

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- .7

ª %

Long-term Liabilities

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ª

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%

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ª %



Total Liabilities º » .¼

7% ½ ¾ .¼

¾ %¿

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Net Wor th ¼

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Percent of Sales

Sales Á ¾ ¾ . ¾ ¾ % Á ¾ ¾ . ¾ ¾ % Á ¾ ¾ . ¾ ¾ % Á ¾ ¾ . ¾ ¾ %

Â ross Ã argin ½ ½ . ¾ ¾ % ½ À . ¾

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Selling, Â eneral & Administrative Expenses ¿

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Adver tising Expenses ¿

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Profit Bef ore Interest and Taxes Á ¾ . Á Ä % Á

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. º º % Á 7. ¾ Ä %¿

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Ã ain Å atios

Current¿

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Quick ¿

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Total Debt to Total Assets º »

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Pre- tax Å eturn on Net Wor th » ¾ .¿

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Pre- tax Å eturn on Assets ½ À . º Ä % º

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Additional Å atios Year Á Year ¿

Year ½

Net Profit Ã argin À . Ä Ä % Á ¾ . ¾ ½ % Á Á . Ä À % n.a

Å eturn on Equity

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º ½ .

¿

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¿ ¿

% n.a

Activity Å atios

Accounts Å eceivable Turnover ½ .¼

Ä ½ .¼

Ä ½ .¼

Ä n.a



Collection Days Æ Æ Ç Æ Ç È n.a

Accounts Payable Turnover È .

É

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Payment Days Ë

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Ì Ë

Í n.a

Total Asset Turnover Î .7Ë

Î .7 Ì Ë

. Í Í n.a

Debt Ï atios

Debt to Net Wor th É .Ê

7 Ì .Ê Ê

Ì .Ë

7 n.a

Current Liab. to Liab. Ì . Í Ì Ì .77 Ì . Í È n.a

Liquidity Ï atios

Net Working Capital Ð Î Æ Ì , Æ Ì É Ð È Î Ç , É

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Interest Coverage Ë

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Æ

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É n.a

Additional Ï atios

Assets to Sales Ì .Ë

7 Ì .Ë

7 Ì . Î Æ n.a

Current Debt/Total Assets Ê

Í %Ë

Î % É Í % n.a

Acid Test Ì .Ê Ë

Ì . Í 7Ë

. É

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n.a

Sales/Net Wor th Ç . É Ç Æ . Î É Î . È

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n.a

Dividend Payout Ì . Ì Ì Ì . Ì Ì Ì . Ì Ì n.a

A endi

Sales Forecast



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Expenses

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Pro For ma

ash Flow

onth 1

onth ¤

onth ¦

onth ¢

onth ¥

onth ©

onth 7

onth 8

onth ̈

onth 10

onth 11

onth 12

Cash £

eceived

Cash f rom §

perations

Cash Sales ÿ

0 ÿ

0 ÿ

¦

1,000 ÿ

¦

7,7¥

0 ÿ

¥

2,000 ÿ

¥

2,¥

00 ÿ

70,000 ÿ

70,000 ÿ

70,000 ÿ

¥

7,¥

00 ÿ

78,7¥

0 ÿ

102,¥

00

Cash f rom £

eceivables ÿ

0 ÿ

0 ÿ

0 ÿ

¦

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¨ ¦

,©

7¥

ÿ

114,©

7¥

ÿ

156,050 ÿ

159,250 ÿ

210,000 ÿ

210,000 ÿ

208,750 ÿ

174,625

Subtotal Cash f rom §

perations ÿ

0 ÿ

0 ÿ

¦

1,000 ÿ

40,850 ÿ

145,675 ÿ

167,175 ÿ

226,050 ÿ

229,250 ÿ

280,000 ÿ

267,500 ÿ

287,500 ÿ

277,125



Additional Cash

eceived

Sales Tax, VA T, ST/

ST

eceived 0.00%

0

0

0

0

0

0

0

0

0

0

0

0

New Current Borrowing

0

0

0

0

0

0

0

0

0

0

0

0

New

ther Liabilities

interest-f ree)

0

0

0

0

0

0

0

0

0

0

0

0

New Long-term Liabilities

0

0

0

0

0

0

0

0

0

0

0

0

Sales of

ther Current Assets

0

0

0

0

0

0

0

0

0

0

0

0

Sales of Long-term Assets

0

0

0

0

0

0

0

0

0

0

0

0

New Investment

eceived

0

0

0

66,000

0

0

0

0

0

0

0

0

Subtotal Cash

eceived

0

0

1,000

106,850

145,675

167,175

226,050

229,250

280,000

267,500

287,500

277,125

Expenditures !

onth 1 !

onth 2 !

onth

!

onth 4 !

onth 5 !

onth 6 !

onth 7 !

onth 8 !

onth 9 !

onth 10 !

onth 11 !

onth 12

Expenditures f rom

perations

Cash Spending

28,500

28,500

28,500

28,500

28,500

23,500

33,500

33,500

33,500

33,500

33,500

33,500

Bill Payments

117

3,514

6,914

106,227

120,287

163,927

167,078

214,580

214,570

213,057

172,050

250,140

Subtotal Spent on

perations

28,617

32,014

35,414

134,727

148,787

187,427

200,578

248,080

248,070

246,557

205,550

283,640

Additional Cash Spent

Sales Tax, VA T, ST/

ST Paid

ut

0

0

0

0

0

0

0

0

0

0

0

0

Pr incipal

epayment of CurrentBorrowing

0

0

0

0

0

0

0

0

0

0

0

0

ther Liabilities Pr incipal

epayment

0

0

0

0

0

0

0

0

0

0

0

0

Long-term Liabilities Pr incipal

epayment

1,688

1,688

1,688

1,688

1,688

1,688

1,688

1,688

1,688

1,688

1,688

1,688

Purchase

ther Current Assets

0

0

0

0

0

0

0

0

0

0

0

0

Purchase Long-term Assets

0

0

0

0

0

0

0

0

0

0

0

0



Dividends "

0 "

0 "

0 "

0 "

0 "

0 "

0 "

0 "

0 "

0 "

0 "

0

Subtotal Cash Spent"

30,305 "

33,702 "

37,102 "

136,415 "

150,475 "

189,115 "

202,266 "

249,768 "

249,758 "

248,245 "

207,238 "

285,328

Net Cash Flow #

"

30,305) #

"

33,702) #

"

6,102) #

"

29,565) #

"

4,800) #

"

21,940) "

23,784 #

"

20,518) "

30,242 "

19,255 "

80,262 #

"

8,203)

Cash Balance "

103,395 "

69,693 "

63,591 "

34,026 "

29,226 "

7,286 "

31,070 "

10,553 "

40,795 "

60,050 "

140,312 "

132,109

Pro For ma $

alance Sheet

%

onth 1 %

onth 2 %

onth 3 %

onth 4 %

onth 5 %

onth 6 %

onth 7%

onth 8 %

onth 9 %

onth 10 %

onth 11 %

onth 12

Assets Star ting Balances

Current Assets

Cash &

133,700 &

103,395 &

69,693 &

63,591 &

34,026 &

29,226 &

7,286 &

31,070 &

10,553 &

40,795 &

60,050 &

140,312 &

132,109

Accounts '

eceivable &

0 &

0 &

0 &

93,000 &

203,150 &

265,475 &

308,300 &

362,250 &

413,000 &

413,000 &

375,500 &

403,000 &

535,875

(

ther Current Assets &

0 &

0 &

0 &

0 &

0 &

0 &

0 &

0 &

0 &

0 &

0 &

0 &

0

Total Current Assets &

133,700 &

103,395 &

69,693 &

156,591 &

237,176 &

294,701 &

315,586 &

393,320 &

423,553 &

453,795 &

435,550 &

543,312 &

667,984

Long-term Assets

Long-term Assets &

0 &

0 &

0 &

0 &

0 &

0 &

0 &

0 &

0 &

0 &

0 &

0 &

0

Accumulated Depreciation &

0 &

0 &

0 &

0 &

0 &

0 &

0 &

0 &

0 &

0 &

0 &

0 &

0

Total Long-term Assets &

0 &

0 &

0 &

0 &

0 &

0 &

0 &

0 &

0 &

0 &

0 &

0 &

0

Total Assets &

133,700 &

103,395 &

69,693 &

156,591 &

237,176 &

294,701 &

315,586 &

393,320 &

423,553 &

453,795 &

435,550 &

543,312 &

667,984

Liabilities and Capital%

onth 1 %

onth 2 %

onth 3 %

onth 4 %

onth 5 %

onth 6 %

onth 7%

onth 8 %

onth 9 %

onth 10 %

onth 11 %

onth 12

Current Liabilities

Accounts Payable &

0 &

3,397&

3,387&

102,268 &

114,825 &

158,412 &

159,925 &

207,427&

207,418 &

207,408 &

163,802 &

239,193 &

317,483

Current Borrowing &

0 &

0 &

0 &

0 &

0 &

0 &

0 &

0 &

0 &

0 &

0 &

0 &

0



Other Current Liabilities )

0 )

0 )

0 )

0 )

0 )

0 )

0 )

0 )

0 )

0 )

0 )

0 )

0

Subtotal Current Liabilities )

0 )

3,397)

3,387)

102,268 )

114,825 )

158,412 )

159,925 )

207,427)

207,418 )

207,408 )

163,802 )

239,193 )

317,483

Long-term Liabilities )

100,000 )

98,312 )

96,624 )

94,936 )

93,248 )

91,560 )

89,872 )

88,184 )

86,496 )

84,808 )

83,120 )

81,432 )

79,744

Total Liabilities )

100,000 )

101,709 )

100,011 )

197,204 )

208,073 )

249,972 )

249,797)

295,611 )

293,914 )

292,216 )

246,922 )

320,625 )

397,227

Paid- in Capital)

50,000 )

50,000 )

50,000 )

50,000 )

116,000 )

116,000 )

116,000 )

116,000 )

116,000 )

116,000 )

116,000 )

116,000 )

116,000

0

etained Earnings 1

)

16,300) 1

)

16,300) 1

)

16,300) 1

)

16,300) 1

)

16,300) 1

)

16,300) 1

)

16,300) 1

)

16,300) 1

)

16,300) 1

)

16,300) 1

)

16,300) 1

)

16,300) 1

)

16,300)

Earnings )

0 1

)

32,014) 1

)

64,018) 1

)

74,312) 1

)

70,597) 1

)

54,971) 1

)

33,911) 1

)

1,991) )

29,939 )

61,879 )

88,928 )

122,988 )

171,057

Total Capital)

33,700 )

1,686 1

)

30,318) 1

)

40,612) )

29,103 )

44,729 )

65,789 )

97,709 )

129,639 )

161,579 )

188,628 )

222,688 )

270,757

Total Liabilities and Capital)

133,700 )

103,395 )

69,693 )

156,591 )

237,176 )

294,701 )

315,586 )

393,320 )

423,553 )

453,795 )

435,550 )

543,312 )

667,984

Net Wor th )

33,700 )

1,686 1

)

30,318) 1

)

40,612) )

29,103 )

44,729 )

65,789 )

97,709 )

129,639 )

161,579 )

188,628 )

222,688 )

270,757

Documents

Computers Reseller Business Plan