23 Jul 2009

Sample Essay: Business Plan for a Startup Business

A business startup requires a lot of thoughts and strategies. Whether it is in the manufacturing industry or the service industry, every minute detail of the business prospect in terms of its profitability to its competitors must be studied and evaluated to understand the gravity of the venture and the risks involved. Thus, a proper business plan has to be developed and tested against the current market to understand its viability.

A business plan will only help to develop and improve the proposed business. It helps the proposed to understand the business, define what they want from the business, understand customer needs, and how to optimize the proposed business.

The first stage of the business plan is to focus on the basic parameters of the proposed business, like constructing the mission statement, identifying the keys to success, undertake market analysis, and create a break-even analysis to give the proposed a critical head start toward understanding the business.

However, startups are not as simple as it seems, for in the manufacturing industry, one needs to address product development, packaging, retail fittings and signage, office equipment, website development and maintenance, and the initial capital to run the show before actual returns are generated. Unless one has the wherewithal to support these expenses on their own, they will then have to look to banks to avail loans. In the service industry, the level of investment is comparatively lesser, and therefore not much thought needs to go into the financial aspect of the startup capital.

An ideal platform for a startup business would be to develop the plan in stages to meet the proposed business goal. Adding a basic sales and expense forecast will help understand profit and loss, so vital in business (Berry, 2008).

There has been a drastic change in the way logistics operate today. Today, logistics is about economics of scope than economics of scale. What this means is that more and more companies are now concerned about the scope for development rather than volume. Quality is what is foremost on the agenda of logistic operators.

Business is characterized as evolving away from the earlier objective of single exchange transactions towards a long-term buyer-seller relationship of mutual benefit. These strategic relationships generate managed supply chains.

Today, logistics involves the cooperation through economic networks for mutual benefits. In other words, individualism has given way to collectiveness. That’s right! Logistics is about total solution under one roof. This way, companies manage their business with lesser paperwork, less tracking and negotiations, and shared responsibilities. What brought about this transformation? Consumers; that’s right! Consumers today seek greater product variety at high quality level and obviously, reliability. Product availability is mandatory. Thus, the huge containers that used to carry high volumes of consignments have now been cut to size to accommodate quicker and easier handling, thereby accommodating faster and efficient services, plus continuity. In order to attain such professionalism, global corporate houses have become centers of corporate structures, centered on the principles of co-operation and partnership; outsourcing of logistics functions.

Globalization and outsourcing has opened new vistas for logistic operators in relatively all areas of operations, be it shipping lines, forwarders, terminal operators, road haulers, or rail operators. The integration of these services under a single umbrella is what corporate managers seek today. Together, this integration provides new value-added services as an integrated package.

Executive Summary

The strategy process is quite intriguing, yet exhilarating. Every company has its share of researchers who respond to the strategy process challenge by identifying certain traits that can either bring moments of exhilaration or disillusion. Disillusion comes from the often grotesque outcome of their effort leading to an outcome that is far from impressive. A lot of empirical research goes into the strategy process; large, often heroic and distinctive, collection of data is required to explore the possibility of linking strategy process and decision-makings, and finally to performance. The potentially revealing and insightful information comes at a cost, a cost that can nip the career perspective of the researcher, if it crashes. However, the outcome, though comprehensive, can be complex, messy, and notoriously fragile.

Nonetheless, a significant part of the research is characterized by controversial normative orientation; strategic change or protecting and extending existing strategies, as Chakravarthy (2003) said. Such outcomes remain highly influential (if successful) until they are outdated, out fashioned, or shown to be hazardous.

In short, a prescription that would guarantee supra-normal profits consistently would de-facto become the strategic management field’s own version of the proverbial money machine (Szulanski et.al, 2006).

1.1       Objective

This paper proposes to illustrate the advantage that introduction of information technology has in leveraging the competitive advantage in the courier industry. The business is set to operate from Minneapolis, and with so many courier companies operating around the city, it becomes imperative for the startup courier business to introduce MIS to enhance and beat competition. Minneapolis-Saint Paul area has many courier companies of repute. Names of OnTrac Courier Services, LLC, General Delivery Service Incorporated, Blazing Saddles INC, Edina Couriers LLC, DHL Express, Dash Delivery Service, On Time Delivery Service, and Quicksilver Express Courier to name a few, are well established names in the courier business, and any startup courier business will have to either match them in service or beat them with technology to make any mark here. It is with this objective in mind that the startup courier company that is proposed will incorporate the best of technology to leverage competition (Citysearch, 2008).

1.2       Mission

The courier industry is highly competitive, and consumers have become far more knowledgeable, and this makes the industry far more complex to run. Unless customer service is enhanced, there is every chance of the business losing important clientele and depleted database. To enhance service and keep abreast competition, the new Courier business will introduce the best of technology to enhance performance through tracking and execution. Since a lot of important documents and consignments are routed to destinations to save time, courier companies need to offer fast, reliable and foolproof service to them. This is what the introduction of new technology will offer, and sought for the new startup company

1.3       Keys to Success

As a startup, the first priority would be to vision the future to create a successful business strategy. The vision is something that is proposed of an industry that it must create, shape and transform over time. For this, the business leaders need to seek input from the enterprise, customers, employees and business partners. Earlier, many business houses defined their products and strategies to attract customers, but this has now changed. Today, concentration is on what values they have created for customers. Therefore business must address customer needs and demands rather than using their product or service and enforcing it on the customer. Greater competition, globalization and faster imitation have caused many products or services to become commoditized. Customers are far more knowledgeable and demanding than earlier days. They have access to more information through new channels such as the Internet. They are more knowledgeable and discerning than ever before and demand exceptional value. Customer relationships have come to the fore.

Peter Drucker (2001) once wrote that there was only one valid definition of a business purpose, and that was to create a customer. What the business thinks it produces is not of importance, it is what the customer thinks he is buying, what he considers as value, that determines the present and future of the business[1].

Similarly, Adrian Slywotzky (1996) in Value Migration[2] said that a business strategy in never complete without addressing its customers, define and differentiate its services, define the tasks it will perform, configure its resources, and creates utility for the customers.

IT related programs to improve and increase customer services are mandatory as well.

2.0       Company Summary

As a startup courier company in the Minneapolis area, the company has great business potential, as the twin cities of Minneapolis-Saint Paul metropolitan area is home to many industries and business. The new company will incorporate some of the latest IT solutions to beat competition. It will put in place a strong supply chain management that will provide real-time visibility and control over changes occurring in the supply chain industry. The technological development is such that, the supply chain industry today has the availability of solutions for Supply Chain Planning (SCP), Supplier Relationship Management (SRM), Enterprise Resource Planning (ERP), and Business Intelligence (BI). This is what will help the new startup company develop its business and beat competition (Oracle Corporation, 2005).

3.0       Product Description

Logistics refers to the systematic management of various activities required to move a product or from the production/manufacture plant to the customer. It encompasses more than just movement of goods; it involves timing, cost, location, availability, and support systems. With globalization, competition at regional and international level has become even more intense, and cost and availability are prime concern for the end-user. Most companies therefore are forced to rethink their logistic operations to maintain stability on all fronts.

While we saw that in the 1980s and 1990s companies tried to out beat competition through improved production and reduced costs (cheap labor being one), technological advancement negated this advantage and forced companies to look for alternatives. Time is a constraint in today’s business world. Time spent on execution of orders has led to legal entanglement and business loss. This is the biggest worry in the world of supply-chain management. There is a growing demand for time-based logistics management, where customers are increasingly sophisticated and value time as money. To ensure quick and efficient streamlined flow of goods from the producer/supplier to the customer, companies now track factors that cause delay and try to eliminate them (Kent N. Gourdin, p.9, 2001).

Efficiency and durability are trade mark of a successful logistic operation. Using state-of-the-art network modeling tools to determine how well the distribution network serves the customers, logistics should include, inbound to outbound facilities, inventory, and service, employing all modes of transport (air, sea, rail, and road). Another important aspect of logistics is to analyze variables, such as inventory cost, time-in-transit, and service by product, industry, and location (Dynamic Logistics, 2007).[3]

The Internet, e-tailing and electronic commerce play an important role in logistics and their importance can be traced to dramatic changes in the corporate world of supply chain management. Together, they have gained importance in bringing gains and sustaining competitive advantage. Of the technology options, Logistics Execution Systems (LES) plays a vital role in the order fulfillment and product delivery.

Companies need to meet challenges, and to do this successfully, they spend time and money developing solutions in-house that will enable them to accurately identify, track, manage and report on material flow as well as efficiently allocate resources to related tasks throughout the pipeline. In order to achieve this, companies need to focus on:

Centralized distribution centers

Channel-specific distribution center design

Repackaging, labeling and pricing at the distribution point

A move to more conventional or hybrid warehousing with on-line, real-time computer-based warehouse management systems

Compliance as well as supplier labeling and price marking

Increased use of standard bar code for product, packaging and ship container identification to facilitate warehouse management, shipment tracking and POS transaction monitoring

Supplier’s retail store level inventory (VMI).

Trading partner communication

Growing use of decision support, modeling and simulation tools

Employee empowerment through tools to increase operational efficiency and productivity

In warehousing operations, an increasing number of companies have grown cautious about investments in large scale, opting instead for more flexible, fully conventional approaches or hybrids that combine mechanized and conventional alternatives (Hill, p.2-3, 2003).

Initially, LES were introduced to permit real-time material tracking and resource management in conventional warehouses, using bar codes for material tracking, a broader array of radio data terminals for industrial applications, and a dramatically improved computer performance at lower cost and a variety of software tools to relational data base management.

Warehouse Management Systems had clearly come of age. Industry leaders began to see results as revenue grew at better than 20% annually and initiated programs to add functionality in the areas of labor (LMS) and transportation (TMS) management. LES (logistics execution systems) emerged as the new acronym for systems that managed material and data flow in the supply chain (Hill, p.4, 2003).

There are three basic forms of outsourcing with regard to supply chain management. These are other methods used to improve production, quality and inventory. They are:

1          The outsourcing of the production of components. Global Corporate develop long-term relationships with a number of suppliers on the basis of mutual trust.

2.         Value-Added Logistics (VAL). VAL implies that production and distribution of a supply chain integrates into one.

3.         The outsourcing of transportation, warehousing and distribution. Third-party Transportation, warehousing and distribution activities are fast growing outsourcing businesses.

Though the above methods have been successfully used and managed by a few corporate, outsourcing of transport, warehouse and distribution should be the ideal situation to minimize capital investment and ensure more professionalism.

4.0       Market Segmentation

A supply chain involves the movement of raw materials from a supplier to the production house, which is then processed to form the final product, before being sent to the customer (who placed the order) through a distribution system. As mentioned earlier, with the advent of computers and software to run them, it has become easy to track the movement of shipments from the origin to their final destination. Any organization that is in the service, maintenance and production sector rely on quick supply and replacement of spares and parts for their business success. Though the functions are more or less the same, supply chains vary depending on the size of the organization and the type of business they are in. Customer satisfaction is paramount. In a highly competitive world of computer hardware manufacture, satisfying a customer is utmost paramount for success. Scheduled deliveries, dispatch of spares and add-ons on time are paramount to the success of that business. Should a customer find his/her business affected due to non-availability of spares, or delayed replacement of machinery parts in their workshop, they will not only cancel their order, but would in all likelihood change the supplier for delayed shipment.

Almost all industries use couriers these days to stay competitive and because of this, all courier companies, must be able to provide foolproof and reliable service to stay in front. Be it the computer manufacturers or their suppliers, heavy or light machinery manufactures or suppliers, office equipment manufacturers and suppliers, service units and so on, they depend on time-bound services to beat competition.

5.    Competitive Edge

Transportation eats into profits considerably. As in the case of location, transportation costs can be minimized by having the distribution centers close to customer’s access. The same can be said in terms of production and spares as well. Air transport is quick, but at the same time expensive, in comparison to shipping by boat or rail. Yet using sea or rail often means maintaining higher levels of inventory in-house to meet quick demands by the customer (Rockford Consulting, 1999).

Some 30% of the cost of a product is encompassed by transportation; therefore it is imperative to use the correct transport mode.

There has been a drastic change in the way seaports operate today. The era gone by Fordism ‘Economies of scale’ has been replaced by ‘Economies of scope’. This post-Fordism change has seen a revolution in logistic movement. Subsequently, the port authorities who were hitherto the ‘bosses’, found themselves at the receiving end. Today, logistics talks of organizations cooperating through economic networks for mutual benefits. In other words, individualism has given way to collectiveness. Consumers today seek greater product variety at high quality and reliability. Availability is mandatory. Thus, huge containers are now cut to size to accommodate faster and efficient services. In order to attain such professionalism, global corporate houses have become centers of corporate structures, centered on the principles of co-operation and partnership; outsourcing of logistics functions.

The outsourcing of transportation, warehousing and distribution is an appropriate way to cut transportation costs. Third-party Transportation, warehousing and distribution activities are fast growing outsourcing businesses. Globalization and outsourcing has opened new vistas for shipping lines, forwarders, terminal operators, road haulers, rail operators and barge operators. Together they provide new value-added services as an integrated package. Improvements in terminal and landside operations are required to lower the cost on door-to-door servicing and savings at sea, one reason why shipping companies are expanding their scope to include terminal operations and hinterland transportation. Customer service is most important for any business. In order to achieve this, easy product reach is necessary. This can be provided using multi-level mode of transport to reach the customer’s destination (Christopher M, 1992).

Strategy process can be defined as the identification or uncovering of connections between the social, cognitive and political processes by which strategies can be formulated to make firms perform (Szulanski et.al, 2006).

Wireless technology, such as @Par combines with ERP and WMS systems. This technology enables clients for pick-up, put away, receive, deliver, dispatch, cycle count, and cart management functions, the lifeline of the supply chain business. It is built on a robust platform that integrates through XML. It has advanced features like instant messaging, speech recognition; RFID tags, and uses a wireless LAN to transmit data in real time.

IristaWare system prioritizes, directs and confirms activities based upon the real-time conditions and constraints of space, equipment, and inventory. This software enables companies to automate their inbound order processes, inventory control, and outbound distribution activities using RF, barcode, and auto-ID technology. From advanced ship notice (ASN) processing to lot and serial number maintenance, iristaWarehouse tracks and controls the movement of both raw materials and finished goods through the distribution network. Advanced functionality including yard and dock management, value added processing, cross-dock fulfillment, and wave planning provide the tools to increase throughput while reducing operating costs (irista.com).

Monitoring and analyzing daily demand signals creates an accurate forecast in inventory and transportation. Real-Time Forecasting (RTF) helps reduce forecast errors substantially leading to reduced and expedited shipments and transportation costs.

In can also be noted that how today’s standards-based modeling, monitoring, connectivity, and process integration tools that comprise IBM’s Process Integration suite are allowing companies to implement process automation components with greater speed and agility than ever before.(Noel, Supply Chain Management).

Decisions pertaining to supply chain management cover long-term and short-term goals. Strategic decisions come under the jurisdiction of corporate policies, while operational decisions deal with day-to-day activities and problems within the organization. Therefore, an organization normally structures their supply chain on a long-term basis, while at the same time, focus on the day-to-day activities. In order to succeed, corporate heads need to assess the market demands, customer service, transport considerations, and pricing constraints to structure the supply chain effectively. These factors are inconsistent, and thus have to be monitored regularly to avoid harm.

Structuring a supply chain also requires an understanding of the demand patterns, service level requirements, distance considerations, and cost estimation, among others. These factors too are highly volatile, and can affect deliveries and supplies. Thus, this is an additional parameter that needs constant monitoring.

6.      Sales Strategy

Innovation is the secret behind success and failure. By treading known strategies or ideas, one can never achieve the kind of success envisaged by them. It takes more than just hard work to beat competition. Innovation makes all the difference. Considering the various technological advantages available today to offer efficient, safer and fast services, the new startup courier company can with limited resources be able to outsource a major part of its services and still end up with a sizable business volume that hurts competition.

Transportation eats up a major chunk of a producer’s profit, and if a solution is provided to ease the tension and at the same time, reduce their overheads, it will become an instant success. This is what is required by the startup courier company to concentrate on.

7.0       Management Summary

With the introduction of new technology to support operations, tracking and routing of consignments will be easy and clients will be able to get prompt delivery schedules and confirmations, enabling them to plan their strategies to minimize costs. In today’s world of globalization, the movement of spares and important machines are routed through couriers because of their worth. Couriers engage in land, air and sea transport to complete of shipments based on their value and size. By tie-ups, the company will be able to minimize their operational costs, but enjoy handsome returns from their association with partners. This will enhance profits and help the startup courier company to beat competition. The new technology will decrease manpower and operational overheads, while at the same time, streamlining deliveries.

8.0       Financial Plan

The Financial plan must draw on the following to derive the profit and loss statement and the revenue generated by the courier business for the first year of operations.

Company Name:

Income Statement for the year ending _____________ [Month]

Revenue:

Revenue: Services
Total Revenue Generated: Services

Revenue: Miscellaneous
Bank Interest
Total Revenue: Miscellaneous

Revenue: Expenses

Direct Costs:
Materials
Equipment Rentals
Salary (Owner)
Wages
Maintenance
Miscellaneous
Total Direct Costs

General And Administration
Accounting and Legal Fees
Advertising and Promotion
Bad Debts
Bank Charges
Depreciation and Amortization
Insurance
Interest
Office Rent
Telephone
Utilities
Credit Card Commissions
Credit Card Charges
Total General And Administration

Total Expenses

Net Income before Income Taxes

Income Taxes

Net Income

CASH FLOW PROJECTIONS

(Add a row of monthly headings to cover one year period)

Cash Revenues
Revenue from Service Charges
Cash Disbursements
Cash Payments to Franchisee Partners
Management Draws
Salaries and Wages
Promotion Expense Paid
Professional Fees Paid
Rent/Mortgage Payments
Insurance Paid
Telecommunications Payments
Utilities Payments
Total Cash Disbursements

Reconciliation of Cash Flow
Opening Cash Balance
Closing Cash Balance:           Total ash Revenues – Total Cash Disbursements
(Susan Ward, About.com).

9.0       Profit and Loss

10.0     Conclusion

While starting a courier company may be simple, there is more to a company that sustains itself in the face of competition and those that fizzle out without a fight. A lot of study and planning is required to undertake a project that has numerous competitors fighting over the spoils. This report just about summarizes the basic needs to understand the market requirement and what are the parameters to be addressed to launch a competitive courier company in Minneapolis area. With a huge industrial and business base, Minneapolis offers good opportunities to well-established and unique service providers. The basic necessity of any service-oriented company is to address the needs of the customer, for, the customer is king.  Innovation and the use of technology such as MIS and RTF (Real-Time Forecasting) and Wireless technology, such as @Par combined with ERP and WMS systems help courier companies to track and record the movement of consignments. With globalization, courier business has gone overboard and more and more practices are being incorporated to beat competition. Logistics is an area of wide acceptance, as machinery and equipment find their way across borders to ease production and quality costs. This has made many courier companies to expand their business into multi-mode logistic operations with partnerships to ease huge capital investments.

The new startup courier company that is sought to be made up looks at including logistics in a big way to beat existing business in the Minneapolis area.

11.0  Bibliography

Berry T, Bplans: A Simpler Plan for Startups, http://articles.bplans.com/index.php/business-articles/writing-a-business-plan/a-simpler-plan-for-start-ups/

Szulanski G, Porac J, and Doz Y, Strategy Process: Introduction to the Volume, The Challenge of Strategy Process Research, 2006, http://www.rotman.utoronto.ca/~baum/v22_intro.pdf

iristaWare, http://www.irista.com

Jasmine Noel, BPM and SOA: Better Together, IBM-sponsored white paper by analyst, a founding member of Ptak, Noel & Associates, http://all-free-info.com/supply-chain-management

Christopher M., 1992, Logistics and supply chain management: Strategies for reducing costs and improving services (London: Pitman Publishing).

Citysearch, 2008,  http://twincities.citysearch.com/yellowpages/directory/Twin_Cities_MN/20/532/page1.html

Rockford Consulting Group Ltd, RCG University, Supply Chain Management, 1999, http://rockfordconsulting.com/scm.htm

Oracle Corporation, Measuring Supply Chain Excellence, March 2005 AMR Research report “How Best to Measure Your Supply Chain Today, http://www.oracle.com/newsletters/updates/2005-10-21/supply-chain-management/measure-supply-chain-effectiveness.html

Kent N. Gourdin, 2001, Global Logistics Management: A Competitive Advantage for the New Millennium, Blackwell Publishing, Google Book Search

John M. Hill, 2003, White Paper, Logistics Execution Systems Perspective, Supply Chain Forum, www.idii.com/wp/ESYNC_LES_Perspective.pdf

Dynamic Logistics, Services, 2000-2010, www.dynamiclogistics.com

Susan Ward, About.com, Small Business: Writing the Business Plan, http://sbinfocanada.about.com/cs/businessplans/a/bizplanfinanc_4.htm


[1] Peter Drucker, 2001, The Practice of Management, Butterworth-Heinemann, Oxford, p.35

[2] Adrian J. Slywotzky, 1996, Value Migration, Howard Business School Press, Boston, p.4

[3] Dynamic Logistics, Services, www.dynamiclogistics.com

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