Business Plan

Business Plan

Online sales.com

Adam W. M.Céline T.

Andrei C. Z.Kristaps K.

University of Ottawa

March 21, 2007

Copyright. Adam W. M., Kristaps K., Céline T., Andrei C. Z., Ottawa, Canada. March 2007.

Table of Contents 1.1 Business Opportunity........................................................................................................- 4 -1.2 Business Description.........................................................................................................- 4 -

1.2.1 Company Mission:...................................................................................................- 4 -1.2.2 Business Stages:........................................................................................................- 5 -

1.3 Business Model.................................................................................................................- 5 -1.4 Competitive Advantage.....................................................................................................- 6 -

1.4.1 Value Proposition:....................................................................................................- 6 -1.5 Company Status................................................................................................................- 7 -

2.0 Management and Organizational Structure....................................................- 7 -2.1 Management Team............................................................................................................- 7 -2.2 Employees.........................................................................................................................- 8 -2.3 Board of Directors.............................................................................................................- 8 -2.4 Organizational Structure...................................................................................................- 8 -2.5 Ownership and Legal Structure.........................................................................................- 9 -2.6 Intellectual Property and Licenses....................................................................................- 9 -2.7 Service Providers..............................................................................................................- 9 -

3.0 Industry/Market Feasibility Analysis..............................................................- 9 -3.1 Canada Industry Overview..............................................................................................- 10 -

3.1.1 Current Market Development..............................................................................- 10 -3.2 United States Industry Overview....................................................................................- 11 -

3.2.1 Current Market Development..............................................................................- 11 -3.3 Industry Trends...............................................................................................................- 11 -3.4 Industry Analysis............................................................................................................- 12 -

3.4.1 Porters Five Forces Analysis.................................................................................- 12 -4.0 Marketing Plan..............................................................................................- 14 -

4.1 Product/Distribution Strategy.........................................................................................- 14 -4.1.1 Product Description...............................................................................................- 14 -4.1.2 Customers...............................................................................................................- 14 -4.1.3 Website Operation.................................................................................................- 15 -

4.2 Pricing Strategy...............................................................................................................- 16 -4.2.1 Supplier Pricing......................................................................................................- 16 -4.2.2 Online Sales Pricing Strategy................................................................................- 16 -4.2.3 Seller Pricing..........................................................................................................- 16 -4.2.4 Buyer Pricing..........................................................................................................- 16 -

5.0 Business Unit Strategy..................................................................................- 17 -5.1 Marketing and e-strategy................................................................................................- 17 -

Advertising and Customer Relationship Management (CRM):.................................- 17 -Targeting..........................................................................................................................- 17 -Acquisition.......................................................................................................................- 18 -Retention..........................................................................................................................- 19 -Expansion.........................................................................................................................- 19 -

5.2 IT and Cyber Security.....................................................................................................- 19 -Personnel..........................................................................................................................- 19 -Systems.............................................................................................................................- 21 -Clients:.............................................................................................................................- 21 -

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SWOT Analysis:..............................................................................................................- 22 -SWOT Conclusion and Risk assessment:.....................................................................- 22 -

1. How can we use each strength to take advantage of Opportunities and eliminate threats and risks?.......................................................................................- 22 -2. How can we eliminate or minimize each Weakness to enable new opportunities, and to avoid being targeted by Threats or to increase risks?.................................- 23 -

6.0..............................................................................Implementation and Evaluation............................................................................................................................- 24 -

6.1 Execution Timeline...................................................................................................- 24 -6.1 Balanced Scorecard...................................................................................................- 24 -7.1 Balance Sheet March 2007.............................................................................................- 25 -7.2 Balance Sheet projections for 2007................................................................................- 26 -7.3 Balance Sheet projections 2008-2010.............................................................................- 27 -7.4 Projected profit and loss – 2007-2008............................................................................- 28 -7.5 Projected Profit and loss – 2008 to 2010........................................................................- 29 -7.6 Cash Flow Budget...........................................................................................................- 30 -7.7. Revenue Projections.......................................................................................................- 31 -7.8 Revenue Projections 2008-2010.....................................................................................- 31 -Appendixes:.........................................................................................................................- 33 -

Graphs:............................................................................................................................- 33 -1. Sites Visits...............................................................................................................- 33 -2. Revenue Projections 2008......................................................................................- 33 -3. Revenue Projections...............................................................................................- 34 -4. Income Projections.................................................................................................- 34 -

Tables:..............................................................................................................................- 34 -Table 1: Canadian and US growth............................................................................- 35 -Table 2: AC Nielsen study for eBay..........................................................................- 35 -

Charts:..............................................................................................................................- 35 -Chart 1: Marketing model.........................................................................................- 35 -Chart 2: Implementation Timeline............................................................................- 36 -Chart 3: Balanced Scorecard.....................................................................................- 36 -

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1.0 The Business

1.1 Business Opportunity

Businesses all over the world have inventories they cannot sell. The holding of such inventory

until a seller can be located constitute large financial burdens to these organizations. Other

companies may not have excess inventory problems, but rather their sales forces are operating at

maximum capacity and therefore their potential for sales is diminished. Furthermore, finding

new clients within markets away from their home operations is a problem for firms all over the

world.

1.2 Business Description

Online Sales meets these opportunities by allowing companies from around the world to list

excess inventory for sale, bulk inventory and general products they want sold on the website.

The general public uses the website to search for these companies’ products and sell them on

their behalf for a commission. In general our business is a virtual consignment and

wholesale/liquidation shop. Our business allows companies to quickly and easily sell their excess

inventory or to find new clients for their products; thus saving companies’ money and generating

extra revenue. Members of the public can earn another source of income. The primary function

of our business will be the wholesale/liquidation of inventory.

1.2.1 Company Mission:

Online Sales’ mission is to become the largest online wholesale/liquidation/consignment

businesses, offering companies a cost effective and efficient way to sell their products and

inventories, while empowering the public to sell those products for financial gain.

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1.2.2 Business Stages:

3-Year Plan

Online sales will begin operations and plans to generate over $4 millions in revenue within a

three year period. Online Sales has also set a goal of reaching 200,000 people visiting the

website each month by the end of year three.

1.3 Business Model

Customers

The customers are the general public who uses the website to search for goods to sell to other

customers (end users). They find people to buy products listed on the website by our suppliers

and earn a commission off the sale. They can also purchase the good themselves and re-sale it to

earn a profit.

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Customers Customer’s (end users)

These are the end users who purchase the products sold to them by our customers.

Suppliers

Suppliers are companies that have excess inventory to sell or products they want help selling.

They list products and ship them to the end user or customer once a sale has been completed.

They receive payment once goods have reached their target, minus sales commissions.

Suppliers Supplier’s

These are the companies that make our suppliers products

Online Sales

We allow for customers and suppliers to exchange information and arrange the sale of goods. We

earn a commission off of each sale as well as act as the mediator for the exchange of money

between the end user, customer and supplier.

1.4 Competitive Advantage

1. Products offered on online sales will be discounted lower then they can be found anywhere

else on the internet giving end users reason to use our service over dealing directly with the

suppliers.

2. The online consignment model Online Sales uses allows companies to quickly sell off excess

inventory reducing their costs, moving away from this system would mean greater costs for

organizations making them reliant upon Online Sales.

1.4.1 Value Proposition:

Suppliers and customers have many different ways they can interact with our site and receive

value, here are a few examples.

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1. The users (customers) of the website will gain value by earning income through

commission they earn by selling our suppliers products. A simple $4000 sale would earn them

$120 with just a 3%commission.

2. Savings we will create for the companies who need to keep their excess inventory in the

warehouse sales force costs. We basically provide a free (5% commission, but they make

commissions anyway) service.

3. Our website will contain sections where people can post the lists of things they are

looking which

1.5 Company Status

The company is currently in the planning stages. A new company name is also being considered.

2.0 Management and Organizational Structure

2.1 Management Team

Adam Moede, CEO. With a family background in entrepreneurship, Adam is up to the task of

operating a business. He will be responsible for overseeing the daily operation of the company

and future strategic decision making.

Kristaps Kuplais, CFO. With over 3 years of experience in accounting roles, Kris is well

equipped to take on the challenging role of Chief Financial Officer to control the finances of our

company.

Andrei Zagrean, CMO. Andrei will be responsible for business development and online

advertising and marketing strategy.

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Céline Tacnière. Céline will be responsible for identifying customers needs and play a strategic

role in the day to day operations, while acting as the administrative help for the executives.

Mohammed Saheb, COO. The Chief Operations Officer will be responsible for the daily

operations, upkeep and development of Online Sales website and its servers.

2.2 Employees

IT Professional

The IT Professional will work closely with the COO to keep Online Sales technology

infrastructure operational. They will report directly to the COO.

Customer Service Representative

The Customer Service Representative will be responsible for answering customer and supplier

inquires either by email or through a dedicated telephone line.

2.3 Board of Directors

Online Sales’ board of directors will consist of five individuals; the CEO, a member from the

law firm representing Online Sales and three CEO’s from Canadian ecommerce firms. The four

external members will provide guidance to Online Sales.

2.4 Organizational Structure

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Board of Directors

Board of Directors

COOCOO CEOCEO CFOCFOCMOCMO

Customer Service Rep

Customer Service Rep IT ProfessionalIT Professional

2.5 Ownership and Legal Structure

The four founding partners will each maintain an equal share and control of the business at 25%

each. A founder’s agreement will be signed in order to establish each partners’ responsibilities.

The company plans to incorporate as a privately held Canadian corporation.

2.6 Intellectual Property and Licenses

The corporation’s name “Online Sales” will be registered using the “Newly Upgraded

Automated Name Search” (NUANS).

Articles of Incorporation are required to be submitted to the Federal Corporations Directorate

and registered.1 The entire process is to be completed online.

The domain name “onlinesales.com” needs to be registered with Internic.ca. The domain

extensions .ca and .com and will be registered.

2.7 Service Providers

Law Firm

The law firm Osler, Hoskin & Harcourt LLP will represent Online Sales, located in major

Canadian metropolises. Osler, Hoskin & Harcourt LLP specialises in business and ecommerce

law. Online sales will consult them on any legal matters.

3.0 Industry/Market Feasibility Analysis

Online Sales operates online, however it will operate within the offline wholesale industry, the

retail industry and the non-store retail industry since it will source it its vying for the same

1 http://www.newbusinessnow.com/information/incsteps.htm

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customers and use the internet simply as a means to facilitate transactions, reduce costs and find

clients. Wholesale agents and brokers will buy and sell merchandise owned by others for a fee or

commission basis; they do not take title to the goods they buy or sell, and they generally operate

at or from an office location.2 Wholesale merchants do take entitlement; they are still included in

the market analysis since the goods that make up this industry can be sold through our business.

The retail trade sector comprises establishments primarily engaged in retailing merchandise,

generally without transformation, and rendering services incidental to the sale of merchandise3.

Retail is included in our analysis, however only part of the industry could actually use Online

Sales. Given the statistics available, it is impossible to distinguish exactly what industries within

the retail sector would use Online Sales.

3.1 Canada Industry Overview

3.1.1 Current Market Development

Wholesale

Total sales by all wholesale trade groups were $501,035 billion in 20064. As of 2006 there were

52,644.8 Canadian wholesale inventories5. The wholesale industry in Canada represents 6.4% of

total GDP6.

Retail

Total sales by all retail trade groups were $391 billion in 20067 Total non-store retail revenues in

2004 were $11,845,350. Within four years this sector has gown 14%8. Total retail sales dropped

2 http://stds.statcan.ca/english/naics/2002/naics02-class-search.asp?criteria=413 http://stds.statcan.ca/english/naics/2002/naics02-class-search.asp?criteria=44-454 http://www40.statcan.ca/l01/cst01/trad20a.htm5 http://www40.statcan.ca/l01/cst01/trad22a.htm6 http://strategis.ic.gc.ca/epic/site/whol-comm.nsf/en/qu00011e.html7 http://www40.statcan.ca/l01/cst01/trad15a.htm8 Appendix A

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to $276 million in 2006 when supermarkets, convenience stores and gasoline retail were

removed.

3.2 United States Industry Overview

3.2.1 Current Market Development

Wholesale

Total sales by all wholesale merchants in all trade groups in 2005 were over three trillion

dollars9. Total wholesale sales have grown 64.45% in ten years from 199510. In 2004, US$451

million worth of wholesale sales was done through e-commerce11. In the United States,

merchant wholesale e-commerce sales reached $270 billion in 2001 despite the fact that total

sales for this industry declined; this was a 12% increase over the previous year12.

Retail

The retailing industry is the second largest industry in the United States. Total retail sales in

2005 were $1.780 Trillion; minus Food/Beverage stores and general merchandise stores, total

sales falls to $768 billion13.

3.3 Industry Trends

Wholesale

Retailers are attempting to bypass wholesalers to source cheaper goods directly with the

manufacturer14.

9 http://www.census.gov/compendia/statab/tables/07s1039.xls10 Appendix A11 http://www.census.gov/compendia/statab/tables/07s1038.xls12 http://strategis.ic.gc.ca/epic/site/whol-comm.nsf/en/qu00017e.html13c? http://www.census.gov/compendia/statab/tables/07s1018.xls14 Merget – The North America Retailing Sectors

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Wholesalers are increasingly small firms with 50 or less employees15.

Wholesale sales in Canada have been generally climbing in 2001, after levelling out during the

latter half of 200016.

Retail

Increased wages will lead to increased consumer spending.

Workers will continue to leave the retailing sector in search of better work, creating a labour

shortage.

Retail sales are climbing in Canada. The many factors underpinning retail growth

include growth in markets brought about by increased population, rising incomes and

the formation of new households Retail sales are climbing. The many factors

underpinning retail growth include growth in markets brought about by increased

population, rising incomes and the formation of new households17

3.4 Industry Analysis

3.4.1 Porters Five Forces Analysis

Entry Barriers

The construction of a fully operational website will take a large amount of time and of capital,

but not enough to be a substantial barrier to entry. Given that the business operates online with

little in the way of physical infrastructure, the costs are not a significant issue. Trust is a major

concern because new companies will find it difficult to get users to use the service since it is not

recognizable.

Competitive Rivalry

15 Merget – The North America Retailing Sectors16 http://strategis.ic.gc.ca/epic/site/whol-comm.nsf/en/qu00011e.html17 http://strategis.ic.gc.ca/epic/site/retra-comde.nsf/en/h_qn00156e.html

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The industry in growing but not at a huge rate. There are many wholesalers and retail operations

within the North American industry; however not many wholesalers are operating online. This

lowers the competitive market for online wholesaling. Retail operations are increasingly moving

online however. There are very few barriers to exit for wholesalers since they are made up of

offices and warehouses.

Bargaining Power of Suppliers

Since in the case of Online Sales the suppliers will be using the website to reduce their inventory

costs or source new clients, the benefit they receive outweighs ours. They do have the option to

use offline wholesalers and sales methods; however they can save money and time using this

service. There is also little threat of forward integration. Overall the bargaining power of

suppliers is low.

Bargaining Power of Buyers

The buyer has little bargaining power since there is low concentration, our service offers them a

price benefit, they may buy large volumes but the discount is already applied for them.

Switching costs may be moderate because it would be difficult to find some of the products

being offered another way.

Threat of Substitutes

There is a great deal of substitute’s offline; however there are not many substitutes for online

wholesaling. There are many online retail sites however. Overall substitutes are moderate too

high.

3.5 Competitor Analysis

There are few direct competitors to Onlinesales.com. The closest competitor is liquidation.com

which is an online wholesale action site. It offers roughly the same service except it relies on the

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end user to come to the site and requires users to wait out a bidding process. Someone must

already know what they want and take the time to attempt to get their products. At the same time

prices for goods can continue to increase. Overall the two services have enough differences to

not cause any problems. Offline wholesalers are unlikely to be a major competitor since

Onlinesales.com offers greater value over their service.

4.0 Marketing Plan

4.1 Product/Distribution Strategy

4.1.1 Product Description

The core product of Online Sales is its website. Onlinesales.com has two main functions. First it

allows companies to list excess inventory or regular products they want sold on the website.

Second the general public can come to our website and view the products/inventory that the

companies have listed. That person can then attempt to sell any of those products or inventories

to someone else, its consignment without any actual product being shipped to the seller. If the

person can find another person to buy the product or inventory, the company listing the product

ships the goods to the buyer and gives a commission to the seller and to our website for

facilitating the transaction. The seller however could also buy the products themselves,

consignment with the shipment of goods, and then re-sale them for profit, or keep them.

4.1.2 Customers

Suppliers:

The suppliers are companies from all around the world that have excess inventory for sale, or

products they need help selling.

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Sellers:

Sellers are the general public who come to the website to earn commission by selling the

suppliers products/inventories or earn profit off of the re-sale of the goods.

Buyers:

The buyers are the end users of the product. They are the ones who the sellers sell the suppliers

products or inventories.

4.1.3 Website Operation

Use of the website begins with the supplier opening an account. Once they have opened an

account and provided all the necessary information and agreed to all terms and conditions they

can begin listing products. They must decide if they want to list products to be sold continuously

or if they are listing excess inventory to be sold off. Once they have decided they upload all the

necessary information about their products that someone would need to sell them; this includes

and pictures, technical specifications, etc. They upload a price and quantity (if it is inventory)

and our website engine tells them the discount required (see pricing strategy). T he price that is

listed on the website is minus all the commissions. The next stage of our website involves a

member of the public signing up and logging onto our website. They then chose to search our

wholesaling section or our consignment section. They chose the products and or inventories they

want to attempt to sell and go out and sell them. Once they have made a sale they give the seller

the buyers shipping information through our website and the money is collected through our

website as well to be distributed to the supplier once the goods have been shipped, minus ours

and the suppliers’ commission.

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4.2 Pricing Strategy

4.2.1 Supplier Pricing

The company supplying the goods for the website will sell their products at their regular price

minus a discount determined by if they are listing excess inventory or regular products, regular

products require smaller discounts. The amount of discount that must be offered on the suppliers

inventories will increase depending on the amount the seller is selling or buying from them. This

discount represents the benefit the supplier receives for the selling of their inventory in bulk.

4.2.2 Online Sales Pricing Strategy

The discount that the supplier must pay will only be partially listed on the website. Part of the

discount will be absorbed by Online Sales because of their commission for facilitating the

transaction and by the commission that will be paid to the seller for selling the product. The

final price that is listed on the website for the supplier to see and offer to the end user will be the

supplier’s regular price minus the discount with Online Sales and the sellers commission

subtracted from that. A discount is required so that the end user does not circumvent our service

and deal directly with the supplier; the prices offered to the end user will always be lower on our

site then if the consumer dealt directly with the supplier.

4.2.3 Seller Pricing

The seller receives a commission that is predetermined for the item they are selling. It is listed

with the price the end user will pay.

4.2.4 Buyer Pricing

The buyer will pay the price that is listed with the product on the website, it will be lower then if

they were to try and purchase the product themselves.

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5.0 Business Unit Strategy

5.1 Marketing and e-strategy

Advertising and Customer Relationship Management (CRM):

Targeting

Our attempt is to target a specific demographic, which has been documented by market research

firm AC Nielsen for the major e-commerce player, eBay. Since this is the only research result

available due to the novelty of the market, we will compensate for the supplier side of the

business with our own investigation.

The AC Nielsen study mentions that there are roughly 212 million buyers and seller in the e-

commerce game. In the US there are 128 million (60%), which makes the region even more

attractive for our primary advertising strategy. The rest of 84 million (40%) are spread across

other countries, cultures and continents which increases the effort required to contact and attract

the in a cost effective manner. Online stores on USA eBay site represent 57.8% (173,000) of the

entire number of stores, which is equal to 299,000. The research mentions that there are 726,000

sellers in US that use the e-commerce website as their primary and secondary source of revenue.

Also it is noted that 1.5 million people use the e-commerce site to supplement their income in the

US, and that 95% of all seller are small business or individual. This gives us the opportunity to

target roughly 2.3 million sellers and 128 million buyers only in the US. Translated in dollar

value this segment represents roughly CAD $4B (60%) of the revenue figure. On top of these

figures are the growth rates of the US whole sale industry, 64.43%, from $2.16B in 1995 to

$3.55B in 2005, and the growth of the Canadian non-retail sales (14.29%) from $10.4B in 2000

to $11.85B in 2004.

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Table 1: AC Nielsen study for eBay (main findings)

Buyers and Sellers:

•        212 million Worldwide

•        128 million in the US

•        84 million in the other countries

•        299,000 eBay stores worldwide

•        173,000 stores hosted on the US site

•       

Sellers

•        724,000 in US; Primary + Secondary source of income•        1.5 million in US; Supplement their income selling

online

•        95% of eBay sellers are individuals or small businesses

Source: AC Nielsen study for eBay, November 11, 2006.

Acquisition

The acquisition strategy will be based on an advertising campaign that will run continuously in

order to receive as much exposure as possible. Our ads will be placed on websites such as

PayPal, Yahoo, Google AdSense, Hot Jobs, and Monster.com. The reason behind these channels

is that the target segment is a heavy user of these services, which sometimes are bundled

together. Another modality for attracting and populating the website with sales people will be to

access Monster.com’s database and contact all the sales people who posted their resumes or that

have profiles. This could be done either by using targeted email campaigns or a call center to

help us increase awareness of our website and stimulate sales. The same strategy will be used for

Workopolis.com and other sales focused recruiting agencies in the region. This would ensure a

very low acquisition cost per sales person. A potential problem at this point could be overlapping

advertising messages which could be eliminated by screening email addresses, or by using

services in specific locations only.

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Retention

Our company will try to improve retention by offering a strong value proposition, based on a

winning price level. Since we focus on excess inventory sales, we will ask for a discount rate

bigger than that of their best retail or wholesale current offer. In this way we will add value to the

market place and our suppliers and sales force will have to return due to the fact that the prices

are the best in the market place.

Expansion

The strategy is to steadily increase the value of our sales force by increasing the number of

products they are selling through weekly targeted newsletters that contain new or existing

products according to the experience of the sales person. The sales force will constantly be our

main target for expansion, because it represents the source of our revenue.

5.2 IT and Cyber Security

Personnel

One of the most important assets of the organization is its knowledge worker, or the IT

personnel. Due to the technologically dependent nature of the business, the IT personnel must be

qualified not only to operate the systems in place, but also to design and maintain them. In this

way, key competitive factors will be kept in-house and the organization will have more control

over its intangible assets. Any changes to the systems in the use, will be executed in a much

faster manner, which allows decisions to be quickly implemented and, therefore, results will be

easier to achieve.

For the first six months to one year of operations the organization will hire one IT professional,

whose main responsibility will be to build and maintain the website and the e-commerce engine

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behind it. As shown in the financial statements, the cost to develop and maintain the website is

evaluated at $12,000 over a period of three to four months.

The website will allow suppliers of goods or services to post their merchandise under certain

categories and in quantities they choose. In the same time, the sales force will be able to create

their own profiles on the website, so that the suppliers can contact them and vice versa. The main

idea is to prevent the supplier and sales person to avoid our website and consequently the

payment of commission. To achieve this, our focus will be on forcing suppliers to post products

at lower prices than their best retail or wholesale offer. Since the purpose of the website is to sell

excess inventory, we believe that obtaining cheaper products that anyone else, will give us the

competitive edge, and when combined with an online sales force, will turn our plan into a source

of revenue. Having cheaper products in bulk quantities, the sales force will have to return to the

website in order to obtain new product offers. This basically represents our value proposition

mentioned in the beginning of the report: Offer products for sale in bulk quantities at the lowest

price possible, to a world wide network of sales people.

Another duty of the IT employee is to conduct training sessions with the rest of the personnel

regarding computing security. This will give our staff the right knowledge on how to prevent

data corruption and loss but will also inspire trust to our customers. The data protection and

cyber security policies in the internal environment of the organization will represent a key

objective and its evolution and effectiveness will constantly be monitored with the help of a

balanced scorecard, which will be discussed in the Implementation and Evaluation section of the

report.

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Systems

Several encryption and security software solutions will be acquired and installed on our systems,

which have the role of protecting the sensitive data of our company, clients and suppliers. The

costs related to the implementation of these solutions are presented in the financial systems.

Another category of software is represented by the office productivity suites and the operating

systems that run on our computers. To minimize costs, our company is using a combination of

open-source and proprietary software solutions.

Regarding the financial transactions and the computer systems involved in the Finance

department, it can be mentioned that our company will use an existing online banking system:

PayPal. In this way, we will minimize transaction responsibility and paper work in exchange for

a small fee as shown in the financial statements.

Clients:

When it comes to our clients, our first priority is to ensure their security and privacy are fully

respected. To enforce this policy, our company will take all the necessary measures to make sure

that we deliver on our promise. Starting with the internal environment and the work philosophy

of our employees, the financial processes and on-site interaction, our company will implement

the necessary security measures. To protect the data existing on our computers, we will encrypt

all hard drives, removable drives and backups. They will also be constantly archived and

deposited in a secure place in the end of the day. The assistance of specialized consultants and

security providers will be required to develop a consistent security screaming and protection

system. Access to information and the transfer or copying of it will be closely monitored on a

24h 365d basis. We fully understand the online security concerns regarding fraud and identity

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theft of our clients and these issues represent key managerial objectives that will constantly be

improved.

SWOT Analysis:

Strengths:

Flexible product and service offer Scalable business model Low startup and operations costs In-house business and IT knowledge Low financial, product, and service liability

Easy product knowledge transfer between suppliers, company and sales force

Weaknesses:

Limited advertising budget Limited revenue streams Business requires large sales turnover for

consistent profit Reliability on external factors: sales force,

product quality Limited control over advertising channels Limited personal relationships with

suppliers and clients

Limited customer support

Threats:

Developing the initial community Improved inventory practices Customer and supplier rejection Strong competition from similar businesses Clients default to pay Target for potential online attacks

Prone to online fraud schemes

Opportunities:

Growing online commerce Capitalize on excess inventory and over

production levels Serve various growing markets Take advantage of existing sales forces to

sell excess inventory

Take advantage of network effects: easy to become a client or supplier and to spread the word

SWOT Conclusion and Risk assessment:

1. How can we use each strength to take advantage of Opportunities and eliminate

threats and risks?

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Using our in-house knowledge combined with a flexible product offer we can promote the

product and service offer to existing online sales force and in this way capitalize on the

supplier’s excess inventory. To achieve this goal, a strong and energetic advertising campaign

must be launched in order to achieve the critical mass of suppliers and sales people required to

create a constantly growing revenue stream.

2. How can we eliminate or minimize each Weakness to enable new opportunities, and

to avoid being targeted by Threats or to increase risks?

In order to build a sustainable business, we will focus on developing personal relationships with

major suppliers in order to give the business a more personal touch. This will help us to secure a

constant source of revenue and will also reduce complete reliability on external factors such as

product quality and sales force. Even though the reliability on these factors cannot be eliminated,

we will decrease the chances that a potentially unsafe big ticket item will be sold through our

website. Due to the nature of the business and its complexity, we cannot take responsibility for

every product sold.

To minimize the threat of an online attack targeted at destabilizing our operations and breaching

our clients’ privacy, we will focus on developing a strict cyber security system to provide

maximum protection possible with as little as possible impact on functionality. This will add to

our credibility and image on the market, creating the necessary conditions for a successful online

business environment.

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Based on the company’s internal and external environment analysis, and taking into

consideration the risks involved in starting and operating the business, the company’s position,

competition and value proposition are considered acceptable and achievable.

6.0 Implementation and Evaluation

6.1 Execution Timeline

The execution of the business plan will start in early May 2007 and during the following three to

four months the website and e-commerce engine will be designed and tested. During this time,

the executive will focus on establishing the business and its headquarters location. Also,

intensive market research and business development activities will take place, and once the IT

aspect of the business is ready to operate the advertising and recruiting effort will begin. The

chart presented in the Appendix shows the project’s milestones.

6.1 Balanced Scorecard

The evaluation of the company’s activity will be a focused mainly on three levels: Marketing,

Finance and IT. In order to clarify the process, a Balanced Scorecardi will be introduced, having

the purpose to monitor the main objectives proposed by the executives.

Since the present paper addresses the last quarter of 2007, certain values are missing in the

Balanced Scorecard. This is due to the fact that the business is in the early stages of operation i “What is the Balanced Scorecard.” 19 March 2005. www.balancedscorecard.org

24

and therefore the beginning values are zero. The objectives are to be set on a monthly, quarterly

and yearly basis by the management team in cooperation with the rest of the employees. This

approach of measurement-based-management will improve the evaluation process, providing

clear diagnostics on each function of the organization. The scorecard also gives a clear target for

the organization, which will improve the departments to focus their efforts in a much more

efficient way. For the purpose of the present report we provided a yearly description of the

objective.

7.0 Financial Projections

7.1 Balance Sheet March 2007

Assets Liabilities and Stockholder EquityCurrent Assets Current Liabilities

Cash: $115,000.00 Accounts Payable $1,000.00Accounts Receivable: $0.00 Wages Payable $0.00Prepaid Rent: $1,500.00 Loans Payable $1,100.00

Credit Cards Payable $1,500.00Total Current Assets: $116,500.00 Rent Payable $1,500.00

Fixed Assets Total Current Liabilities $5,100.00

Vehicles/Bicycles $6,000.00 Long-term LiabilitiesLess Accum. Depreciation -$100.00Furniture $6,000.00 Mortgage Payable $0.00Less Accum. Depreciation -$150.00 Student Loan Payable $10,000.00Office Equipment $3,000.00Less Accum. Depreciation -$150.00 Total Long-term Liabilities $10,000.00Land/Buildings $0.00Miscelenous Assets: $5,000.00 Total Liabilities $15,100.00

Total Fixed Assets: $13,600.00 Stockholders Equity

Other Assets Owner's Investment $115,000.00

Goodwill $0.00 Total Stockholders Equity $115,000.00

Total Other Assets: $0.00 Total Liabilities and Stockholders Equity: $130,100.00

Total Assets: $130,100.00

Balance Sheet for Onlinesales.com as of March 21, 2007

25

7.2 Balance Sheet projections for 2007

AssetsMarch April May June July August September October November December January

Current Assets

Cash: $115,000 $109,500 $97,200 $84,357 $71,189 $61,168 $53,743 $47,304 $41,736 $36,591 $32,017Accounts Receivable: $1,500 $4,200 $6,600 $8,400 $9,210 $10,142 $11,213 $12,445 $13,861 $15,491 $17,364Prepaid Rent: $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500

Total Current Assets: $118,000 $115,200 $105,300 $94,257 $81,899 $72,810 $66,455 $61,248 $57,097 $53,582 $50,881

Fixed Assets

Vehicles/Bicycles $6,000 $5,900 $5,800 $5,700 $5,600 $5,500 $5,400 $5,300 $5,200 $5,100 $5,000Less Accum. Depreciation -$100 -$100 -$100 -$100 -$100 -$100 -$100 -$100 -$100 -$100 -$100Furniture $6,000 $5,850 $5,700 $5,550 $5,400 $5,250 $5,100 $4,950 $4,800 $4,650 $4,500Less Accum. Depreciation -$150 -$150 -$150 -$150 -$150 -$150 -$150 -$150 -$150 -$150 -$150Office Equipment $3,000 $2,850 $2,700 $2,550 $2,400 $2,250 $2,100 $1,950 $1,800 $1,650 $1,500Less Accum. Depreciation -$150 -$150 -$150 -$150 -$150 -$150 -$150 -$150 -$150 -$150 -$150Land/Buildings $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Miscelenous Assets: $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $5,000

Total Fixed Assets: $19,600 $19,200 $18,800 $18,400 $18,000 $17,600 $17,200 $16,800 $16,400 $16,000 $15,600

Other Assets

Goodwill $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total Other Assets: $0

Total Assets: $137,600 $134,400 $124,100 $112,657 $99,899 $90,410 $83,655 $78,048 $73,497 $69,582 $66,481

Liabilities and Stockholder Equity

Current Liabilities

Accounts Payable $1,000 $2,300 $2,100 $1,900 $1,700 $1,500 $1,300 $1,100 $900 $700 $500Wages Payable $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Loans Payable $1,100 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Credit Cards Payable $1,500 $2,500 $2,300 $2,100 $1,900 $1,700 $1,500 $1,300 $1,100 $900 $800Rent Payable $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500

Total Current Liabilities $5,100 $6,300 $5,900 $5,500 $5,100 $4,700 $4,300 $3,900 $3,500 $3,100 $2,800

Long-term Liabilities

Student Loan Payable $10,000 $10,500 $11,000 $11,500 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000

Total Long-term Liabilities $10,000 $10,500 $11,000 $11,500 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $12,000

Total Liabilities $15,100 $16,800 $16,900 $17,000 $17,100 $16,700 $16,300 $15,900 $15,500 $15,100 $14,800

Stockholders Equity

Owner's Equity $115,000 $117,600 $107,200 $95,657 $82,799 $73,710 $67,355 $62,148 $57,997 $54,482 $51,681

Total Stockholders Equity $115,000 $117,600 $107,200 $95,657 $82,799 $73,710 $67,355 $62,148 $57,997 $54,482 $51,681

Total Liabilities and

Stockholders Equity: $130,100 $134,400 $124,100 $112,657 $99,899 $90,410 $83,655 $78,048 $73,497 $69,582 $66,481

Onlinesales.com Balance sheet projections for the year 2007

7.3 Balance Sheet projections 2008-2010

2008 2009 2010Current Assets

Cash: $120,804 $181,207 $208,388Accounts Receivable: $764,508 $1,146,763 $1,720,144Prepaid Rent: $36,000 $36,000 $36,000

Total Current Assets: $921,313 $1,363,969 $1,964,531

Fixed Assets

Vehicles/Bicycles $50,000 $45,000 $41,000Less Accum. Depreciation $5,000 $4,000 $3,000Furniture $20,000 $19,000 $18,500Less Accum. Depreciation -$1,000 -$500 -$500Office Equipment $10,000 $8,500 $7,000Less Accum. Depreciation -$1,500 -$1,500 -$1,500Miscelenous Assets: $5,000 $5,000 $5,000

Total Fixed Assets: $87,500 $79,500 $72,500

Other Assets

$0 $0 $0

Total Other Assets: $0 $0 $0

Total Assets: $1,008,813 $1,443,469 $2,037,031

Liabilities and Stockholder Equity

Current Liabilities

Accounts Payable $80,000 $72,500 $67,500Wages Payable $200,000 $200,000 $200,000Rent Payable $31,710 $46,277 $65,903

Total Current Liabilities $311,710 $318,777 $333,403

Long-term Liabilities

Mortgage Payable $0 $0 $0Student Loan Payable $0 $0 $0

Total Long-term Liabilities $0 $0 $0

Total Liabilities $311,710 $318,777 $333,403

Stockholders Equity

Owner's Equity $697,103 $1,124,692 $1,703,628

Total Stockholders Equity $697,103 $1,124,692 $1,703,628

Total Liabilities and Stockholders Equity: $1,008,813 $1,443,469 $2,037,031

Goodwill(can't be estimated at the current situation)

AssetsOnlinesales.com Balance sheet projections for the year 2007

7.4 Projected profit and loss – 2007-2008

March April May June July August September October November December January February March TotalSales $0.00 $0.00 $620.00 $2,700.00 $6,600.00 $9,900.00 $11,385.00 $13,092.75 $15,056.66 $17,315.16 $19,912.44 $22,899.30 $26,334.20 $93,494.92COGS $0.00 $0.00 $62.00 $270.00 $660.00 $990.00 $1,138.50 $1,309.28 $1,505.67 $1,731.52 $1,991.24 $2,289.93 $2,633.42 $9,349.49

Total Cost of Sales $0.00 $0.00 $558.00 $2,430.00 $5,940.00 $8,910.00 $10,246.50 $11,783.48 $13,551.00 $15,583.65 $17,921.19 $20,609.37 $23,700.78 $84,145.43

Gross Margin $0.00 $0.00 $1,240.00 $5,400.00 $13,200.00 $19,800.00 $22,770.00 $26,185.50 $30,113.33 $34,630.32 $39,824.87 $45,798.60 $52,668.39 $186,989.84

ExpensesWebsite develop $5,000.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $5,000.00Advertising/Marketing $0.00 $5,000.00 $5,000.00 $7,000.00 $7,000.00 $7,000.00 $7,000.00 $7,000.00 $7,000.00 $7,000.00 $7,000.00 $7,000.00 $7,000.00 $80,000.00PayPal Service Charges $0.00 $0.00 $94.55 $188.50 $355.50 $565.80 $841.30 $1,421.30 $2,668.30 $4,016.80 $4,785.30 $6,322.30 $7,134.30 $28,393.95Banking charges $0.00 $0.00 $25.00 $25.00 $25.00 $25.00 $25.00 $25.00 $25.00 $25.00 $25.00 $25.00 $25.00 $275.00Office supplies $0.00 $0.00 $250.00 $250.00 $250.00 $250.00 $250.00 $250.00 $250.00 $250.00 $250.00 $250.00 $250.00 $2,750.00Payroll $0.00 $5,000.00 $5,000.00 $5,000.00 $5,000.00 $5,000.00 $5,000.00 $5,000.00 $5,000.00 $5,000.00 $5,000.00 $5,000.00 $5,000.00 $60,000.00Insurance $0.00 $0.00 $18.60 $81.00 $198.00 $297.00 $341.55 $392.78 $451.70 $519.45 $597.37 $686.98 $790.03 $4,374.47Rent $0.00 $2,000.00 $2,000.00 $2,000.00 $2,000.00 $2,000.00 $2,000.00 $2,000.00 $2,000.00 $2,000.00 $2,000.00 $2,000.00 $2,000.00 $24,000.00Utilities & Telephone $0.00 $0.00 $200.00 $200.00 $200.00 $200.00 $200.00 $200.00 $200.00 $200.00 $200.00 $200.00 $200.00 $2,200.00Server Lease $0.00 $0.00 $500.00 $500.00 $500.00 $500.00 $500.00 $500.00 $500.00 $500.00 $500.00 $500.00 $500.00 $5,500.00Miscelenous expenses(i.e. incorporation fees) $500.00 $300.00 $300.00 $300.00 $300.00 $300.00 $300.00 $300.00 $300.00 $300.00 $300.00 $300.00 $300.00 $4,100.00Total Operating Costs $5,500.00 $12,300.00 $13,388.15 $15,544.50 $15,828.50 $16,137.80 $16,457.85 $17,089.08 $18,395.00 $19,811.25 $20,657.67 $22,284.28 $23,199.33 $216,593.42

EBT -$5,500.00 -$12,300.00 -$12,148.15 -$10,144.50 -$2,628.50 $3,662.20 $6,312.15 $9,096.42 $11,718.33 $14,819.07 $19,167.20 $23,514.32 $29,469.07 -$29,603.58Taxes -$1,375.00 -$3,075.00 -$3,037.04 -$2,536.13 -$657.13 $915.55 $1,578.04 $2,274.10 $2,929.58 $3,704.77 $4,791.80 $5,878.58 $7,367.27 -$7,400.89

Net Profit -$4,125.00 -$9,225.00 -$9,111.11 -$7,608.38 -$1,971.38 $2,746.65 $4,734.11 $6,822.31 $8,788.74 $11,114.30 $14,375.40 $17,635.74 $22,101.80 -$22,202.68

Profit and Loss projections for Mar 07- Mar 08

7.5 Projected Profit and loss – 2008 to 2010

2008 2009 2010Sales $885,312.81 $1,327,969.21 $1,928,531.48COGS $132,796.92 $199,195.38 $192,853.15Total Cost of Sales $132,796.92 $199,195.38 $192,853.15Gross Margin $752,515.88 $1,128,773.83 $1,735,678.34ExpensesAdvertising/Marketing $180,000.00 $180,000.00 $180,000.00PayPal Service Charges $98,115.30 $106,740.30 $111,630.30Banking charges $2,400.00 $2,400.00 $2,400.00Office supplies $2,400.00 $2,400.00 $2,400.00Payroll $108,000.00 $124,200.00 $124,200.00Insurance $26,559.38 $39,839.08 $57,855.94Rent $36,000.00 $36,720.00 $37,440.00Utilities & Telephone 12000 $12,600.00 $13,200.00Server Lease $6,000.00 $6,300.00 $6,615.00Miscelenous expenses $6,000.00 $6,300.00 $6,300.00Total Operating Costs $477,474.68 $517,499.38 $542,041.24

Profit before Taxes $275,041.20 $611,274.45 $1,193,637.09Taxes $68,760.30 $152,818.61 $298,409.27

Net Profit $206,280.90 $458,455.84 $895,227.82

Profit and Loss projections

7.6 Cash Flow Budget

Cash Inflows (Income): 2008 2009 2010 Total (3 years)Beginning Cash Balance (as of Jan 08) $32,017 $537,621 $1,403,431 $1,973,069Cash Inflows (Income):

Acc.Rec. from commision: $764,508 $1,146,763 $1,720,144 $3,631,415

Ads Sales $120,804 $181,207 $208,388 $510,399Google AdSense 171,676.71$ 214,595.89$ 268,244.87$ $654,517 Total Cash Inflows $1,056,990 $1,542,565 $2,196,776 $4,141,813

Available Cash Balance $1,089,007 $2,080,186 $3,600,207 $6,114,882

Cash Outflows (Expenses):Advertising/Marketing $180,000 $180,000 $180,000 $540,000PayPal Service Charges $98,115 $106,740 $111,630 $316,486Banking charges $2,400 $2,400 $2,400 $7,200Office supplies $2,400 $2,400 $2,400 $7,200Payroll $108,000 $124,200 $124,200 $356,400Rent $31,710 $46,277 $65,903 $143,890Utilities & Telephone $36,000 $36,720 $37,440 $110,160Insurance $12,000 $12,600 $13,200 $37,800Server Lease $6,000 $6,300 $6,615 $18,915Miscelenous expenses $6,000 $6,300 $6,300 $18,600Taxes & Licenses $68,760 $152,819 $298,409 $519,988

Subtotal $551,385 $676,756 $848,498 $2,076,639

Total Cash Outflows $551,385 $676,756 $848,498 $2,076,639

Ending Cash Balance $537,621 $1,403,431 $2,751,709 $4,038,243

Onlinesales.com Cash Flow Budget

7.7. Revenue Projections

March April May June July August September October November December January February March Total for 1st year

Number of persons registered to: Sale 30 300 1050 2100 3150 3780 4347 4999 5624 6327 6643 6843 45193Number of persons registered to: Buy 20 80 240 540 810 1013 1164 1339 1473 1620 1782 1960 12042

Number of listings for: Sale 20 200 600 900 1035 1190 1369 1574 1810 2082 2394 2753 15927Number of listings for: Buy 10 15 30 45 68 135 270 540 972 1750 2537 3171 9542

Nubmber of: Ads posted 10 30 60 90 104 119 137 157 181 208 239 275 1611

Income generated from the sales leads: $120.00 $1,200.00 $3,600.00 $5,400.00 $6,210.00 $7,141.50 $8,212.73 $9,444.63 $10,861.33 $12,490.53 $14,364.11 $16,518.72 $95,563.55

Income generated from the ads posted: $500.00 $1,500.00 $3,000.00 $4,500.00 $5,175.00 $5,951.25 $6,843.94 $7,870.53 $9,051.11 $10,408.77 $11,970.09 $13,765.60 $80,536.29Average Sale=$ 750

Site visits 2000 16000 48000 72000 90000 103500 119025 136879 157411 181022 208175 239402 1373414

Income generated from the Google's AdSence: $500 $2,400 $7,200 $10,800 $13,500 $15,525 $17,854 $20,532 $23,612 $27,153 $31,226 $35,910 $206,212

Onlinesales.com Revenue Projections for Mar 07- Mar 08

7.8 Revenue Projections 2008-2010

31

2008 2009 2010

Number of persons registered to:Sell 135,578.22 203,367.33 305,050.99 Buy 24,083.59 60,208.97 90,313.46

Number of listings for:Sale 127,418.06 191,127.09 286,690.64 Buy 23,855.43 59,638.56 149,096.41

Nubmber of:Ads posted in total 2,416.09 3,624.13 4,167.75

Income generated from the sales leads: 764,508.37$ 1,146,762.56$ 1,720,143.84$

Income generated from the ads posted: 120,804.43$ 181,206.65$ 208,387.65$ 885,312.81 1,327,969.21 1,928,531.48

Site visits 1,716,767.15 2,145,958.93 2,682,448.67 Income generated from the Google's AdSence: 171,676.71$ 214,595.89$ 268,244.87$

Onlinesales.com Revenue Projections for 2008- 2010

32

Appendices:

Graphs:

1. Sites Visits

Sites Visits Mar 07-08

0

50,000

100,000

150,000

200,000

250,000

April May June July August September October November December January February March

Month

Sites Visits Mar 07-08

2. Revenue Projections 2008

1

2

Number of registrants

Number of listings-

50,000.00

100,000.00

150,000.00

Number of units

Revenue Projections 2008

Number of registrants Number of listings

3. Revenue Projections

March

Income generated from sales leads

Income generated from ads posted

Income Generated from Google Ads sense

$206,212

$80,536.29

$95,563.55

$0

$50,000

$100,000

$150,000

$200,000

$250,000

March 2007

Revenue Projections March 2007

4. Income Projections

20082009

2010

Income generated from sales leads

Income generated from ads posted

$120,804.43 $181,206.65 $208,387.65

$764,508.37

$1,146,762.56

$1,720,143.84

$-

$200,000.00

$400,000.00

$600,000.00

$800,000.00

$1,000,000.00

$1,200,000.00

$1,400,000.00

$1,600,000.00

$1,800,000.00

Years

Income projections

Income generated from sales leads Income generated from ads posted

34

Tables:

Table 1: Canadian and US growth

Appendix AU.S Wholesale Growth Percentage

1995 Sales $2,159,000,000.002005 Sales $3,550,100,000.00Percent Change 64.43%

Canadian non-store Retail Growth Percentage

2000 $10,364,052.002004 $11,845,350.00Percent Change 14.29%

Table 2: AC Nielsen study for eBay

Buyers and Sellers:

•        212 million Worldwide

•        128 million in the US

•        84 million in the other countries

•        299,000 eBay stores worldwide

•        173,000 stores hosted on the US site

•       

Sellers

•        724,000 in US; Primary + Secondary source of income•        1.5 million in US; Supplement their income selling

online

•        95% of eBay sellers are individuals or small businesses

Source: AC Nielsen study for eBay, November 11, 2006

35

Charts:

Chart 1: Marketing model

Source: [Berry, Norman]: main source; the textbook and its companion web site, including notes from Dr. R.J. Norman available at http://www.dataminers. com/companion/dmt.html “Data Mining Techniques for marketing, sales, and customer relationship management”, Second Edition, by Michael Berry and Gordon Linoff, Publisher: John Wiley, 2004.Chart 2: Implementation Timeline

Gantt chart*: May 2007- April 2008Activity / Month May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar. Apr.

Cyber Security evaluation and Fraud prevention                      

Business establishment and market research                        

Website and e-commerce engine design and testing                    

Advertising and recruiting campaign                        

Business development                      

Evaluation of activity and strategy adjustment                        *Source: "Gant chart." Products. March 19. www.smartdraw.com

36

Chart 3: Balanced Scorecard

Balanced Scorecard*: 2007-2008      Marketing Objectives: 2007 2008

Brand recognition 0 "target"Market share 0 "target"Customer base            Financial Objectives: 2007 2008Sales Turnover 0 "target"

Revenue growth   0 "target"Operations costs   0 "target"      IT objectives:   2007 2008Cyber Security score   0 "target"Maintainance costs   0 "target"*Source: “What is the Balanced Scorecard.” 19 March 2005.

www.balancedscorecard.org

Copyright. Adam W. M., Kristaps K., Céline T., Andrei C. Z., Ottawa, Canada. March 2007.

37