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SPAIRE
7310 Miramar Road Suite 330
San Diego, CA 92126
Cintia Clark | Marissa Garcia | Suzette De La Torre
Ronald Cortez | Raul Hernandez Ochoa
Management 460: Business Plan Development
Dr. Ahsan
San Diego State University
May 5, 2015
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TABLE OF CONTENTS
1. Executive Summary…………………………………………………………………….3
2. Company Description…………………………………………………………………..5
3. Feasibility Analysis……………………………………………………………………..6
4. Industry Analysis……………………………………………………………………….7
a) Porter’s Five Forces……………………………………………………………….7
b) Competitor Analysis………………………………………………………………9
c) Competitive Analysis Grid………………………………………………………..9
5. Market Analysis……………………………………………………………………….10
a) Service Value…………………………………………………………………….10
b) Market Segmentation & Target Market Selection……………………………….10
c) Target Market Size……………………………………………………………….10
6. Marketing…………………………………………………………………………..11-12
a) The Four Ps of Marketing…………………………………………………….11-12
b) Promotional Strategy…………………………………………………………11-12
7. Management…………………………………………………………………………...13
a) Co-Founders……………………………………………………………………...13
b) Ownership structure……………………………………………………………...13
8. Operations Plan………………………………………………………………………..14
a) Facility, location, equipment requirements………………………………………14
b) Non-managerial staffing…………………………………………………………14
c) Regulatory and other compliance issues…………………………………………14
9. Development Plan……………………………………………………………………..15
10. Schedule.………………………………………………………………………..……16
11. Critical Risks…………………………………………………………………………16
12. Financial Plan………………………………………………………………………...17
a) Start-up Funding…………………………………………………………………17
b) Use of Funds……………………………………………………………………..17
c) Break-Even Analysis…………………………………………………………….17
d) Projected Profits and Loss……………………………………………………….17
e) Projected Cash Flow……………………………………………………………..18
f) Projected Balance Sheet………………………………………………………….18
g) Business Ratios…………………………………………………………………..18
13. Proposed Offer……………………………………………………………………….19
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EXECUTIVE SUMMARY
SPAIRE was founded in 2015 and provides a marketing medium for businesses
and nonprofits to reach customers and volunteers through the synchronization of
volunteer opportunities and rewards. Our principal offices will be located at the San
Diego Innovation Center located in Mira Mesa, CA.
Business Service
The business model of SPAIRE is to sell subscription services to non-profits and
business (restaurants, coffee shops and bars). Non-profits will be charged $45 a month
for access to a network of volunteers and real time data of their volunteers and real time
data of their volunteers and $300 a month for businesses to have advertising space, get
more customers and get positive public relations. Presently, SPAIRE is in the early
prototyping stages with alpha testing done in late 2015. It competes against similar
services on the basis of differentiation. SPAIRE’s future plan is to incorporate new
businesses and non-profits as it looks to solidify its network and reach a nationwide
audience.
The Market
SPAIRE is focusing primarily on the millennial population in America. The total
millennial population makes over 74.8 million people in America and are expected to
grow to 81 million by the year 2036. To narrow our target user market, SPAIRE has
decided to focus on the younger millennial target segment, ages 18-24. SPAIRE has
specifically chosen these ages because this is the age where millennials are attending
school and have more time to volunteer.
Competition
SPAIRE competes directly with GiveGrab and VolunteerMatch. Alternatives to
our product include GoFundMe, Fundly, YouCaring. Our service differentiates itself
from the competition by offering rewards to users who volunteers and the app is free. The
competitive advantage lies in providing real time metrics to the non-profits and
businesses of SPAIRE’s users.
Risk/Opportunity
The greatest risk associated with the business today is compiling a good network
of attractive businesses where users can redeem their rewards. At the same time, SPAIRE
needs to group non-profits that millennials care about. Millennials are more willing to
donate when they feel connected to a cause. Furthermore, these businesses and nonprofits
need to believe SPAIRE will add value to their business operations for them to pay the
price asked to be part of SPAIRE’s network. Once these businesses and nonprofits are
integrated into the network, SPAIRE needs to perform on its end of the bargain by
providing them with customers and volunteers; an important factor in terms of the
retention of the businesses and nonprofits and thus the growth of SPAIRE. SPAIRE is
able to overcome these risks because management is well acquainted with industry
visionaries and notable business people. Our biggest recognized opportunities include the
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growing millennial population and how this generation values giving back and making a
difference in the world.
Management Team Chief Executive Officer, Raul Hernandez Ochoa, who founded SPAIRE in 2015,
leads the management team. Raul will graduate in May with a B.S. in Business
Administration Management from San Diego State University. Jessica Cho cofounded
SPAIRE with Raul. She will be graduating in May from UCSD with a B.S. in Psychology
and a minor in Computer Science. She has worked on various technological startups
specializing in user experience design.
Operations
SPAIRE’s office is located at the San Diego Innovation Center. All operations
will be performed in house. Current staff standing is at 2. This number will increase as
SPAIRE looks to integrate a financing and legal team. Further ahead, SPAIRE will look
to expand its customer relations and sales team over in order to retain the network of
businesses and nonprofits it has created.
Capital Requirements
SPAIRE will implement the bootstrapping method to its way of engaging in
business. It does not seek capital investments from angel investors. The company’s
startup capital will be subsidized through the founder’s personal savings along with
crowdfunding alternatives to KickStarter. At the time of incorporating the company
legally as an LLC, SPAIRE’s founders will agree on a dynamic equity split.
Financial Projections
The business plan includes a full set of pro forma income statements, balance
sheets, cash flows, and break-even projections (two years income statement, cash flows,
and balance sheets, and five years of sales projections that calculate gross profit/loss).
The company will work with steady gains based on realistic amount of sales gained from
businesses and nonprofits. SPAIRE’s projected financials has its gross profit reaching
overpassing the one million mark by the third year of operations. SPAIRE’s quick ratio
on year 1 will be 8.20 and it will decrease the following year to 6.80. In contrast,
SPAIRE’s debt ratio will increase from 12.16% to 14.68% in order to fund continue
operations.
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COMPANY DESCRIPTION
SPAIRE was founded on the mission of making a social good in the world.
SPAIRE can accomplish this for it is a platform that allows the next generation of
innovators, millennials, to be connected to volunteer opportunities in their local area and
gain access to exclusive rewards from local restaurants for their volunteer work. This is
done by utilizing geo location through the use of the app on phones and prompts users
with an alert giving the option to donate either time or money. In order to entice giving,
SPAIRE wants to partner with local restaurants and shops to give special coupons or
deals after completing their social good. Through the use of SPAIRE, this allows small
nonprofits to gain awareness and more volunteers via app notifications. SPAIRE allows
local restaurants to get more customers by promoting restaurant's deals and coupons that
can be “unlocked” by volunteering.
SPAIRE differentiates itself from the competition by offering rewards to users
who volunteers. The competitive advantage lies in providing real time metrics to the non-
profits and businesses of SPAIRE’s users. Other businesses do provide metrics but not in
real time. SPAIRE will only charge the businesses and nonprofits while other services
charge the users a fee to be part of a volunteer network. This service will serve the
millennial generation ages 18 through 24. SPAIRE wants to exploit this segment of the
market because they have more leisure to volunteer and are tech savvy, making SPAIRE
a convenience to this generation that is connected to technology and more than often have
the desire to help out in anyway possible to fulfill their need of making a difference in the
world.
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FEASIBILITY ANALYSIS
SPAIRE is a feasible business but such success hinges on how well SPAIRE is
able to compile a solid pool of businesses that are not only attractive, but are
establishments frequently visited by users so they can redeem their reward. SPAIRE
needs to be highly well marketed in order to reach millennials. They are SPAIRE’s target
users and needed for the company to be successful. Another area of uncertainty is the
financial feasibility of the service. Further assessment of how much SPAIRE will charge
nonprofits and businesses will allow the organizational team to appropriately measure the
amount of sales, customers needed, and amount of business to have a clear picture of the
potential profits generated by offering this service.
Research concerning San Diego demographics of millenials makes SPAIRE’s
industry/market feasible. With the help of technology and being located in a
technological hub, San Diego is an ideal city to test SPAIRE. A list of business and
nonprofits needs to be compiled. Furthermore, SPAIRE is a marketing medium for local
businesses and nonprofits to gain exposure. The organizational feasibility of SPAIRE is a
secure with a team that believes. Guy Kawasaki, author of The Art of the Start, suggests
that while relevant educational background and industry experience bolsters a company’s
credibility, it doesn’t mean anything if they do not believe that what you are selling can
change the world. SPAIRE has a solid team but can integrate a member with financial
expertise, as SPAIRE does not want to fall in debt.
SPAIRE is feasible, but a strong foundation will be needed for it to grow.
SPAIRE’s success hinges on three components: the user, the business, and the nonprofits.
One can not be missing from the equation as for all three are needed for SPAIRE to
function. While this is a daunting revelation, it can be accomplished through a lot of work
and networking.
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INDUSTRY ANALYSIS
Marketing consultants provide operating advice and assistance to businesses and
other organizations on marketing issues, such as developing marketing objectives and
policies, sales forecasting, new product development and pricing, licensing and
franchising planning, and marketing planning and strategies.
PORTER’S FIVE FORCES
A. THREAT OF POTENTIAL ENTRANTS
A. As the rate of technological change continues to outpace the ability of companies
to evolve to new media landscapes over the next five years, customers will
engage with companies and purchase products and services using an ever-
expanding number of new devices. As a result, companies will continue to search
for new ways to reach customers through digital channels. Marketing consultants
will be called upon to provide technical advice and strategies for rolling out new
products and services and targeting new audiences through online advertising and
app technology. B. The Marketing Consulting industry faces competition from a variety of other
consulting firms that may also be able to tailor client solutions. The Management
Consulting industry can often provide marketing advice in conjunction with
strategy services, while the IT Consulting industry can provide advice regarding
digital marketing and planning.
B. THREAT OF SUBSTITUTES A. Management Consulting Management consultants advise businesses,
nonprofits, and public-sector agencies in different areas including organizational
design, human resources, corporate strategy, marketing and sales. Management
consultants advise within a wide range of industries and does not focus
particularly or specialize in marketing. There are over 40 management consulting
firms in the San Diego area, according to ConsultingCase101.com.
B. Advertising Agencies Advertising agencies create advertising campaigns and
place the ads in periodicals, newspapers, radio, TV and other media. Ad agencies
provide advice, creative services, account management, production of advertising
material and media planning and buying. This industry is changing greatly with
the plethora of new media channels and therefore is not solely focused on app
advertising. There are many advertising agencies in San Diego.
C. Public Relations Firms Public relations (PR) agencies manage the
communications between an organization and the public to promote favorable
relationships and portray a desire image. PR campaigns aim for exposure through
public interest and news coverage, rather than paid advertisements, to give their
message third-party legitimacy.
D. Market Research Companies in this industry systematically gather, record,
tabulate and present marketing and public opinion data. Industry does not
actually advertise or market for businesses. According to GreenBook.com, there
are 13 marketing research firms located in San Diego.
C. BARGAINING POWER OF BUYERS
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A. Businesses and nonprofits can seek other less costly mediums to promote
themselves and may opt not to be part of SPAIRE if they don’t believe SPAIRE
can provide value to them.
D. BARGAINING POWER OF SUPPLIERS A. Smartphone App Developers This industry develops and publishes
applications for smartphones and mobile devices. Apps are typically sold in a
special "app store" that can be accessed through the device.
B. The IT Consulting Industry It includes firms that provide the following
services to client companies: writing, testing and supporting custom software;
planning and designing integrated hardware, software and communication
infrastructure; and on-site management of computer systems and data processing
facilities. This industry excludes packaged software publishers and off-site data
processing and hosting services.
E. Social Forces and Technological Factors Impacting Industry Changes:
A. Mobile Internet Usage By 2016, the number of mobile devices is expected to
surpass the world’s population–an 18-fold increase between 2011 and 2016
(Cisco). According to Borrell.com, by 2016, 88% of advertising will be delivered
on a mobile device and according to a poll in 2013 by AT&T Small Business
Technology, 66% of small business are maintaining or increasing spend on
digital marketing. While only 25% of small businesses know how to create a
mobile optimized website, there will be an increase in demand for marketing
consultants.
B. Digital Marketing Tremendous consumer growth, numerous new services and
extremely effective targeting make mobile marketing a key area of growth. Local
mobile ad spend is going to grow from $800m to $18b by 2016 – BIA Kelsey.
According to Borrell Associates in 2012, mobile coupons get 10 times the
redemption rate of traditional coupons and mobile ads get 3x the clicks. The
number of average number of coupons that are redeemed is expected to continue
to increase.
C. Civic Engagement and Social Media The Internet continues to grow as an
integral part of everyday civic life, with Millennials leading the way, and
Generation X and Baby Boomers close behind. Volunteering and community
service rates are much higher than those in the 1970s and '80s for Millennials.
Civic involvement has steadily increased as this generation has grown older; the
national volunteer rate actually reached a five-year high in 2012. New
technologies, like mobile apps and social media, are making getting involved fun,
relevant and accessible to Millennials. This generation leads the country in the
civic use of social media. According to a Pew Study on Civic Engagement in the
Digital Age, 48 percent of 18-to-29 year olds decide to learn more about political
or social issues because of what they read on social networking sites and 57
percent engage in political activity on social networking sites and nowhere else.
As more and more Americans dedicate more of their time to digital
communications, community leaders will need to find new ways to fill
community needs using online technology.
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COMPETITOR ANALYSIS
SPAIRE’s biggest competitor is GiveGab. They are a new startup and they offer a
social media platform where users can get connected to local volunteer opportunities
based on their interest and connect with people and share experiences. Yelp also
competes for the local advertising space. They charge a large $350 per 500 impressions
(ad show to users). They leverage their large user base, over 100 million, to attract
businesses. Finally, Waze is a competitor that users geo location to route users to nearby
offers/deals and advertisements.
COMPETITIVE ANALYSIS GRID
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MARKET ANALYSIS
SPAIRE is focusing primarily on the millennial population in America. The total
millennial population makes over 74.8 million people in America and are expected to
grow to 81 million by the year 2036. To narrow the target user market, SPAIRE decided
to focus on the younger millennial target segment, ages 18-24. SPAIRE specifically
choose these ages because this is the epoch when millennials are attending school and
have more time to volunteer.
SERVICE VALUE
Millennials are currently devoting volunteer times for causes they care about.
From our initial customer interviews, millennials find ways to promote and volunteer for
issues or causes they care about. They also do not have a lot of discretionary income.
That is why having a combination of deals and coupons integrated in the app and service
will appeal to this market. Millennials will gain access to unique volunteer experiences in
their area as well as exclusive deals.
MARKET SEGMENTATION & TARGET MARKET SELECTION
SPAIRE’s target market are millennials ages 18-24; college students not yet working
professionally.
TARGET MARKET SIZE 74.8 Million
a. Geographic
a. United States
a. Major cities with millennials: San Francisco, New York City, Washington
DC, San Diego, Los Angeles, Houston, Austin, Chicago
c. Demographic: 74.8 Million in US, to grow at 1.08%
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MARKETING
When segmenting SPAIRE into a market, SPAIRE looks at the other firms in our
industry. Since SPAIRE is trying to connect non-profits and restaurants with volunteers, a
niche market that hasn’t yet been addressed, thus resulting in less competition. These are
similarities between the customers SPAIRE serves in relation to connecting volunteers
with non-profits and websites such as VolunteerMatch.org. When looking at the
customers served, prior websites that serve to connect volunteers and opportunities fall in
the same market, but none up until this point are further connecting volunteers with a
reward system via bars, coffee shops and restaurants.
As a result of this niche segment, SPAIRE’s target market is specialized to
individuals who are interested in volunteering and getting a small reward in return.
SPAIRE wants to connect young adults, i.e. college students, who may not have the
financial means to give monetary donations to non-profits and instead want to give their
time. This market has a lot of power and opportunity as a whole and SPAIRE plans on
connecting and engaging this target market.
SPAIRE plans on establishing a position in a new market that does not yet have
many players. SPAIRE’s position will be to connect those that need help finding
opportunities. SPAIRE has not yet created a tagline but have been toying with a few
different options such as “Connecting today’s volunteers with more”. Our position will
be amongst many established volunteer services but SPAIRE will add the specification of
offering rewards for helping the community.
SPAIRE focuses on highlighting the benefits it offers our members. Unlike other
companies, SPAIRE gives the added benefit of getting a small stipend for volunteering
your time. SPAIRE does this by partnering with bars, restaurants, cafes and coffee shops
that care about social responsibility. The benefit SPAIRE offers is that students and
young adults who already care about helping out society will in return be rewarded with a
small discount at their local partner company of choice.
SPAIRE’s brand is going to be known as a brand of trust that empowers young
adults. SPAIRE’s brand is going to be recognizable from our logo, market position and
website. When volunteering is talked about in the future post-SPAIRE, SPAIRE wants to
be the “Google” of the volunteer world. Ideally, when members of the community are
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looking for volunteer opportunities, the firm wants them to “SPAIRE” it; the company
wants SPAIRE to be its own verb, which is what happens when a company is extremely
well branded. When SPAIRE establishes its brand, it will be launching with the help of
already established brands that it will partner with. For example, Oggi’s on SDSU’s
campus has already agreed to partner with SPAIRE. This not only gives us an incentive
for our current members, but it also will pull in the Oggi’s clientele base. This same
technique will be used to establish SPAIRE with various non-profits and food/beverage
industry locations.
When looking at the Four P’s of marketing, there is a lot to consider. SPAIRE is
the only service like its kind that will match volunteers with a small reward. The price is
unbeatable for its users; its cost for volunteers is nothing and allows them to gain so
much more. From a corporate and non-profit standpoint, the price is minimal and has a
huge return on interest. For the non-profit companies that are hosting their volunteer
events, not only will it make its events easily accessible to their current volunteers, but it
will also open up their network to a much larger pool of volunteers who may not have
otherwise known of the non-profit. The non-profit access cost is extremely low, with a
cost of only $45 per month to list all open volunteer events. The business (restaurants,
coffee shops and bars) have a slightly higher cost of $300 per month; this cost includes
advertising space, positive positioning, public relations opportunities and lastly and most
importantly, a network of potential customers. SPAIRE will offer promotions that our
users can take advantage of; connecting the non-profit volunteer time with a discounted
rate from our business locations as a reward for giving back to the community. Aside
from word of mouth and store promotions, SPAIRE plans to take advantage of social
media, Google AdWords and AdSense. By purchasing a few key AdWords on Google,
our market reach will expand countlessly with a smaller cost. Aside from Google
AdWords, SPAIRE plans on building up our social media presence. SPAIRE will be
implementing Twitter, Instagram, Facebook. Google+, and Tumblr. SPAIRE will also
reach out to bloggers who have a large following that blog on related topics. These
bloggers are followed by thousands of readers and can connect SPAIRE with a market
that it may not be able to reach on its own. Lastly, the beauty of SPAIRE’s “place” is that
it is a mobile and web application that allows its users to access its services from any
location. Along with the ability to use our service from any location, SPAIRE will also
have the added benefit of having multiple reward centers. Since our reward centers are
given through businesses with a wide geographic scope, our customers are not limited to
a set location.
SPAIRE will launch in San Diego where it will begin to build its customer base.
Once SPAIRE has saturated the San Diego market it can continue to expand upward
throughout the rest of California. Once SPAIRE has a basis of volunteers, SPAIRE will
implement a user retention program to incentivize its volunteers to come back to its
service. Finally, SPAIRE will continue to expand across the nation. This will be done,
like stated before, using Google AdWords and AdSense as well as advertising on
Facebook and through bloggers. They key aspect of SPAIRE is creating a customer base
that will motivate non-profits and businesses alike to join our mission.
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MANAGEMENT
The CEO and cofounder of SPAIRE is Raul Hernandez Ochoa, a San Diego State
University student who will graduate in May with a B.S. in Business Administration
Management. Raul has experience in business development, client relationship building
and team leading. He is a creative person, passionate about contributing efforts into
projects that create and impact for the company as well as the community. As a Lavin
Entrepreneur Fellow, Raul has contributed to three projects and has earned the Larry and
Madeline Petersen Endowed Scholarship in Entrepreneurship. He has participated in
SDSU’s Venture Start competition with much appraisal from panel of judges in terms of
where the company is heading. Raul is the adequate leader for propelling SPAIRE to
success.
Jessica Cho is a graduating senior with a B.S. in Psychology and a minor in
Computer Science from UCSD. She has worked on the following technological startups
specializing in user experience design: Aira.IO – Visual Interpreter for the Blind and
SpatialVis. She has a passion for Human-Computer Interaction and has experience in
applied research, interaction design, and programming. Jessica is developing her skills in
different backend languages as well as HMTL/CSS/JS. She hopes to integrate her skills
in human-centered design and technology to build impactful products.
At the time of incorporating the company legally as an LLC, SPAIRE’s founders
will agree on a dynamic equity split.
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OPERATIONS PLAN
SPAIRE’s will be perfectly situated in Mira Mesa, California; a city a couple of minutes
away from San Diego. Based on The Atlantic article titled “The Subway that connects
two continents”:
“San Diego is the 17th largest city in America, yet it leads the world in
biotechnology, clean technology, sports innovation, defense technology and
telecommunications, and according to Brookings, it is the 3rd most patent-intense
region in the world. That is because policymakers, businesses and educators in
San Diego are working collaboratively to create a thriving innovation ecosystem,
comprised of some of the world’s smartest companies, a talented and loyal
workforce, top-tier universities and easy access to international markets. San
Diego’s world-class universities and research centers foster a talented workforce,
attract top academicians, and produce research that powers numerous paradigm-
shifting, life-saving technologies.” - February 2015
SPAIRE will have a suite at the San Diego Innovation Center. There it will house clerical
equipment needed for SPAIRE to operate (telephones, copy machine, computer, etc.).
The cofounders will not take salary and other members who will be added to the team
will also not be taking salary during the first year. In due time, SPAIRE will have to work
with legal advisors to work out regulatory and other compliance issues that might come
about with the app and contracts with businesses and
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DEVELOPMENT PLAN
SPAIRE will develop its business model by setting milestones that will bolster the
following key aspects of the company: technology, sales, marketing, and human capital.
PHASE I (2015-2016) Software & Model Creation
By late 2015, SPAIRE will have an app ready for alpha testing. In tandem with
the development of the app, SPAIRE will make progress on the system’s development
and network development (businesses and non-profits). On the sales aspect of business it
will model its price competitiveness and financial plans for the next phase of expansion.
There will be heavy marketing efforts to launch SPAIRE. The current management team
of two will add an additional member and will specialize in app development.
PHASE II (2017-2018) Subscription Sales
The creation of a standardized system of client accounts will help SPAIRE keep it
network organized and enhance efficiency. Advertising space will be sold as SPAIRE
begins to attain businesses and non-profits. Once the network has compiled enough
business and non-profit portfolios, we will implement a retention program for them to
remain with SPAIRE and thus allow it to grow. A financing team will be added to the
management team to ensure the company does not fall in serious debt and legal team will
also be added to advice and formulate contracts with growing SPAIRE network.
PHASE III (2019-2020) Market Expansion
Reinvesting the profits earned in previous years will allow for SPAIRE to invest in the
creation of a responsive innovation system and also overall system upgrades which
involve security measures. Expansion throughout the United States is a milestone
SPAIRE has to reach during this time. This will involve a nationwide marketing
campaign that will be supported by an expanding retention team and sales force.
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SCHEDULE
CRITICAL RISKS
A major risk for the success of SPAIRE is compiling a good network of attractive
businesses where users can redeem their rewards. What if these business and nonprofits
do not believe in SPAIRE’s mission or do not see the value provided by SPAIRE? These
are crucial factors whose impact needs to be assessed. Our financial projections and
development strategy hinge on the basis that these businesses and non-profits will gladly
pay the subscription fee to become part of a growing network. To mitigate this risk,
SPAIRE needs to train itself with a highly persuasive sales pitch. There will be no
problem in obtaining users for most of the millennials 18-24 where responsive to
SPAIRE and wanted to download the app but the businesses in particular need to believe
that by being part of SPAIRE, they can make a small but substantial contribution in
making a change in the world the change in the world. If millennials were riled to be part
of SPAIRE, so will the businesses. Retaining these businesses and nonprofits for the long
run will be a difficult task. SPAIRE needs to continually remind them that what they are
doing is making an impact. They are needed for when SPAIRE expands to a national
level, such event will serve as evidence that they are making a change in the world.
SPAIRE needs to make them know that SPAIRE’s national reach was all began with
them believing in their mission. It is a powerful and motivational tactic to retain those
involved in SPAIRE’s network.
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FINANCIAL PLAN
SPAIRE’s financial plan is based on receiving funds via crowdfunding platforms
to begin developing and maintaining our application and creating secure databases for our
clients. SPAIRE will achieve profitability during the second half of the its first year and
will continue to grow at a projected 40% rate. This rate accounts for signing on only 20
new clients every month.
[Please see Appendix A & B]
Start-up Funding The startup-up funding will be provided as follows: an initial investment from
SPAIRE’s founders of five thousand dollars. SPAIRE assumes that the founding team
plus its first hire are willing to take pay cuts and be compensated with equity. SPAIRE
will use a dynamic equity split that will allocate a fair and accurate amount of each
employee’s contribution to the team.
[For a full list of assumptions, please refer to Appendix D]
Use of Funds SPAIRE estimates that it will require roughly $35,000 to begin its first year of
operations. The main uses for these funds include rent for office space, legal business
forming fees as well as any miscellaneous legal fees, server and development tools, and
marketing. SPAIRE plans to keep ten thousand dollars of working capital to maintain
cash flows positive and for any emergency. However this ten thousand dollar working
capital is not critical, it will alleviate SPAIRE from going out of business due to lack of
cash.
[Please see Appendix C]
Break-even Analysis Due to the nature of our monthly subscription business model, one non profit
client amounts to $540 of sales a year while restaurants, bars and coffee shops equate to
$3600 of sales a year. At these price points, if SPAIRE were to not sign on any business
clients, it will have to sign on 65 nonprofit clients within the first year to break even. On
the other hand, if SPAIRE were to only sign on business clients for the first year, it would
only have to enroll 10 clients for the year to break even.
[Please see Appendix E]
Projected Profits and Loss SPAIRE plans to sign on a total of 60 non-profits and 180 businesses within its
first year. With a yearly goal of maintaining existing accounts and acquiring new
accounts at a 40% rate, SPAIRE projects to reach million dollar revenues by the end of
its third year. As revenues grow SPAIRE plans to take on more salary expenses to pay its
staff. With a bootstrap mentality, SPAIRE will not pay the founding members full market
rate salary within the first five years. However SPAIRE does expect to pay any new hires
in cash in year three, SPAIRE’s working capital and return on sales.
[Please see Appendix A & E]
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Projected Cash Flow SPAIRE plans to pay its first year expenses from the seed capital from the founders as
well as the startup capital from the crowdfunding campaign. All expenses are expected to
be paid in cash as SPAIRE seeks to taking on debt in its first years of operation.
[Please see Appendix A]
Projected Balance Sheet As SPAIRE expects to gain momentum in its first years and finance the business
with debt, it owns 100% equity. Such leverage will allow SPAIRE to grow organically
and incentivize key hires with stock options and less salary as the business begins to
grow.
[Please see Appendix A]
Business Ratios After the first year of operations, SPAIRE expects to have more than half a
million in working capital. With its high return on sale percentage and low liabilities,
SPAIRE will be in a strong position for any outside investments, if needed. All revenues
are expected to be reinvested into the business to grow into a strong second year. With
higher projected revenues, SPAIRE is expected to have a working capital of a 1.3
million. SPAIRE will then be in a strong position to continue to grow for the coming
years.
[Please see Appendix A]
19
PROPOSED OFFER
SPAIRE is currently not looking for an offer. When SPAIRE generates leverage
through profits around Year 3, this will be an adequate time to negotiate private equity
terms with outside investors, if need be. Once SPAIRE generates leverage through profits
around Year 3, the firm will be in contact with interested parties of acquiring SPAIRE at
the time cofounders feel ready to move on to a new business endeavor.
