Student ID 298469 Thompson Business Capstone Business plan. page 22CES (Consumer Electronic Services) LLC Business PlanBlake H. ThompsonOwner and President363 E 2300 NNorth Ogden, UT(801) 578-5600bthompson@CESUT.comJanuary 22, 2015A.Executive Summary4A1. Business Identification:4A2. Mission, Goals and Objectives:4A3. Keys to Success:5B.Company Summary6B1. Industry History:6B2. Legal Form of Ownership:6B3. Location and Facilities:6B4: Management Structure:7B5. Products and Service:8C.Market Analysis9C1: Target Market10C2: Industry Analysis11C3: Competitive Analysis12D.Market Strategy13D1: 4Ps.13D2: Price List-14D3: Selling Strategy-17D4: Sales Forecast-18E.Implementation Strategy19E1. Overall Strategy-19E2. Implementation-20E3. Control Plan-20F.Financial Statements and Projections21F1. Revenue and Cost Estimate-21F2. Forecasted Profit and Loss Statement22F3. Forecasted Balance Sheet-23G1. Financial Projections24G1a- Breakeven Point-25G1b-Financial Position:26G1c-Capital/Investment Needs:26References28Executive SummaryA1. Business Identification: CES will operate as a home run business in North Ogden, Utah. We will cater to market roughly 100 miles in diameter from the North Ogden area. CES will provide home automation and home theater solutions to the people in the market area. In order to fund the startup costs of CES the owner Blake Thompson has sold a piece of investment real estate and was able to obtain $93,000 in profit from the sale. These funds will be used to provide the necessary startup capital for CES. $60,000 will be put in a business account for startup costs and the remaining $33,000 will be put in savings and be available as a liquid asset for gaps in product purchase and customer payment.CES has been forecasted to have an extraordinarily profitable first year of operation, and will be able to do so without the use of borrowed funds. Based on the forecast the company will spend the better part of the first year in the black and borrowing of funds will not be necessary.A2. Mission, Goals and Objectives: Mission: The mission of CES is to introduce a quality vendor of home theater and home automation services to the Weber County area. Currently the area is limited to Big Box stores, and a few disreputable installers with little to no expertise on home theater design. Goals: Our goal is to make home theater and home automation services accessible to a wide range of customers by customizing each system we install to the individual customers financial allowance. The customers will get a fully customized and professional experience. All CES employees are experts in the installation and calibration of home electronics.Objectives: CES will strive to meet the following objectives:Ensure top level customer service. This will be easy to maintain as there are 3 total employees who all have equal power in decision making practices in relation to costs and service.Establish CES as a market leader in the community with a brand that is recognized and synonymous with the home electronic integration industry.Create a sales plan that will foster a growth in profits that continues to grow. This will be managed depending on the past months performance, and reevaluated monthly.Provide sufficient customer satisfaction that we are able to obtain 40-50% of our business from word of mouth referrals. This will be facilitated by our follow up calls to customers ensuring that all needs have been met and that no problems exist.A3. Keys to Success: In order to be as successful as possible we must strive to meet the following key items:CES must be able to provide a fully customizable product. One that can be purchased all at once or on in stages over time. We need to be sensitive to the fact that the services and products we offer can be cost prohibitive and by allowing a customizable product our customers can feel that they have the financial means to get what they want.CES will need to prevent rework. It is the nature of our business that we will have to make a few visits after installation in order to properly calibrate the system. But we should never be required to return to fix an issue that was caused by poor workmanship or employee error. It takes 50 good jobs to erase one bad job and we cannot afford that cost.Build a network of trust with our customers so they feel that they can come to us with any need they have. We want them to trust us enough that they will send their friends and family our way. And in 5 years when they want to upgrade they will know that they can trust CES with their business.Company SummaryB1. Industry History: CES aims to bring the world of home automation and home entertainment into one clean, easy to use, and affordable package available to the majority of American consumers. Home Automation and home entertainment have always been present in science fiction and portrayals of the future. It was apparent that the world as a whole had accepted the fact that this was the way the world of consumer electronics and homes were headed. Even though science fiction authors dreamt of a day when this would become a reality fully automated homes are only a recent development. Back in the early 1900s we began to see the introduction of home appliances while not automated in of themselves they were the first great leap toward this technology. In 1907 the first electric vacuum cleaner was invented, and in 1909 the first electric toaster. From 1913-1952 we got the first refrigerator, garbage disposal, washing machine, clothes dryer, microwave, and coffee maker. ( Constable, G., & Somerville, B. ) Consumers wanted more, and they got it. To reverse the phrase Creativity was the mother of all necessity. Then around the early 1980s electronics companies began to introduce a multitude of devices that brought home theater and home automation products into the hands of the everyday consumer. VHS systems and high fidelity audio combined with the automated features like programming and remote controls began a revolution of consumer electronics. Now introduce the 21st century into the mix we are now in an age when you can control your homes thermostat, check and see if and when your garage door is open, turn your lights off and on, and set your security system. All while you are watching the latest Blu-ray in 3D in your own home theater with sound quality that rivals the Megaplex theater downtown. Home automation and home entertainment have become synonymous and rely heavily on each other for ease of use and success.Starting in the Mid 1980s hi fidelity systems became available for videos in the homes. If a consumer wanted to experience the improved sound quality of Hi-Fi sound they had to rely on the local electronics store to get the necessary equipment. Soon people wanted more they wanted better sound quality and clarity. This was not possible by just buying a system at a store you had to have someone with experience set the equipment up and calibrate it to the environment it would occupy. Today consumers have a few options if they want a theater in their home. First they can buy the components themselves and do an install. This is risky unless they have experience with electronics they might damage the components if they dont connect them correctly. Next they can buy the components and have a professional set them up. This is a great option if the consumer is looking for a basic system or is living in a rented or temporary residence. They get the best bang for their buck compared to the first option. Or they can have a professional put together and install a completely customized system that has been made specifically for the area it will be placed in. This option gives the consumer the highest quality home theater they can get. They first two options can be accomplished by visiting any big box store and is the fastest way to get the home theater experience. The last option requires a specialized installer and fabricator. There are very few custom installers in the market for home theater systems. And when it comes to whole home automation there are only specialized installers with no big box alternative. B2. Legal Form of Ownership: CES is a home run business and is listed as a LLC and will remain a LLC for the foreseeable future. B3. Location and Facilities: CES will be located at 363 E 2300 N North Ogden, UT at my own personal residence. I have a home office and workshop with an onsite storage space for inventory. The workshop/office space consists of 350 square feet, and the storage is 150 square feet. This is not a retail location and is only a manufacturing/shipping point for products. Per North Ogden City code I have procured a business license and had an inspection performed at my place of business. I have procured the proper insurance coverage on my homeowners policy that will cover any personal injury that could occur in the office/workshop area. Home theater and automation installations are all custom jobs and it would be a financial burden to keep a large inventory on hand. Most inventories will include AV cables, speaker wire, consumables, and basic construction and installation tools. The remaining storage space will only be utilized for short term storage and staging for an installation. Because of this there is no plan of expanding the location into a different facility.B4: Management Structure:For the first year of operation CES will consist of 3 employees Blake Thompson the president and owner, Wendy Thompson the co- owner and CFO, and Steven Brunetti the head installer and technical expert. Below you will find the qualifications of each employee:Blake Thompson has a Bachelors degree in business administration from Western Governors University. He obtained his journeymans electrician license in 2006. He has been installing custom and semi-custom home theater for the past 15 years. He has been installing home automation systems for the past 6 years. He has gone through the THX Certified Professional Home Installation Training offered by THX. Wendy Thompson receive her Masters of Accounting from the University of Utah and has been a CPA since 2008. She has been installing home theaters since she was 12 years old and also has perfect pitch for tones which comes in handy when calibrating a system.Steven Brunetti has been installing home theaters since 1983 while working at Silo a local electronics store he would sell a system to a customer then he would offer to install the system after he got off work. In 1990 he became a general contractor which was his main employment while he still moonlighted in home theaters. He has been fully trained in installation by Pioneer, Sony, Samsung, and THX. He has over 30 years of experience in the field and is an expert in all things electronic. See the chart below for a visual organization structure: B5. Products and Service: CES will offer a full range of home audio, home theater, and home automation services. We will work within each customers budget, and needs to provide a truly custom system in their homes. We will offer services as simple as setting up and installing a television set and Blu-ray player to installing a fully automated home control system. We will work with multiple manufactures of consumer electronics, and because of this we will keep limited inventory on hand. We will keep some universal products on hand that would apply to all of our installs. These will include:HDMI cables various lengths under 12 (over 12 requires a special order)Optical Audio cables various lengths.Standard composite and component RCA cables various lengths.Quad Shield coaxial cable and connectors (1000 spools).Medium quality consumer grade shielded speaker wire various colors (1000 spools).Audiophile grade speaker wire from Monster Cable (500 spools)Cat 5e cable and connectors for home networks. (1000spools).Various A/V connectors and adaptors.Powers stripsZip tiesAA and AAA batteries CES will offer the following services:Basic Television installationWall mountingComplete home theater setupInstallation of home automation components and systemsCustom installation of accent lightingWhole home audio solutionsHome network installation and setupFixing the mistakes of other installers The above list is not comprehensive, and there are many more services that we can offer through partner companies. For example we have a relationship with a local home builder where we can offer our services as part of a new home package where the customer can include the cost of our services in the price of their home. Market AnalysisC1: Target Market: The great part about dealing in home electronics is we have a wide market. Our target market consists of homeowners ranging in age from 20-99. But to really market our services effectively we are looking for the 25-55 year old age group, an average annual income of $45,000 +, children at home, and are early adopters of new technology. Our target area is located within a 100 mile driving radius of North Ogden. We will be working out of a home office and customers will be able to come and see the home theater setup which will also be our show room. We are looking for the consumer that has a desire for technology improvements and a need to keep up with the Joness. Everyone has a television in their home and although we live in a tech savvy world getting all the tech to work together is still a problem for most consumers. We are located in Weber County which has a population of 238,519 with a median income of $54,974 and the average home ownership rate is 71.6% (US Census Bureau, 2014).Our location in North Ogden is ideal as we have a higher median income $74,666 and home ownership rate of 85.6%(US Census Bureau, 2014) this is true for surrounding cities as well (Harrisville, and Pleasant View). The geography of northern Weber County is a mix of suburban and rural with an average population density of 401 persons per square mile (US Census Bureau, 2014). When you take into consideration the average value of homes in the area which is $211,800 and figure that most are sitting around 5.5% interest on their mortgage then after their house payment which would average to be about $1850. With this mortgage payment this would leave the average North Ogden household with $4300 to spend on utilities, auto, food and other expenses. This would leave a substantial amount after taking care of basic needs to spend on entertainment. The culture in this area is focused on acquiring personal possessions and upping their status making it primed for this type of business. We have a contract with Pectol homes a local home builder in Northern Utah. They have agreed to advertise our services and offer a basic, mid-range, and high-end home theater package to new homebuyers which can be included in the purchase price of the home. The owner of Pectol construction is a friend and has agreed to advertise our products in exchange for us advertising their services. We will construct high end systems with full automation in all model homes built by Pectol construction. We have the benefit of a tightly knit community that has shown great success in word of mouth advertising for other companies. The trend in the North Ogden area is not to find the cheapest providers of service but to find the ones with the best and most reliable service. Because of the high number of homes that Pectol Homes build, and the fact that new home construction growth is increasing in the Northern Utah area we feel confident that our marketing plan can be effective with little overhead costs.C2: Industry Analysis: In the current market there is a growing preference for products of a higher quality. In fact a recent market research study from Sandler Research indicated that in the next 4 years the home audio industry will have a CAGR of 16.98% which is promising for companies in this market. The study also indicated that the increase in the number of Smart Homes will help fuel the market growth (Infiniti Research Limited). According to USA Today the market for home theater projectors grew from $406 million in 2010 to $421 million in 2011 this is a nearly 14% increase which would correlate with the Sandler research study (O'Donnell, J). People are beginning to shy away from lower grade products and realizing the value in buying higher tier items. When this is combined with a rise in disposable income and a lower cost of electronic goods it sets up a perfect scenario for the home entertainment and automation department to take off. The 90s were not kind to the home theater world. People were trying to save money by purchasing lower end electronics and they were satisfied with the sound quality that came from the television sets they owned. With the increase of personal media at the turn of the century people began to desire higher quality electronics at home television set picture quality was becoming increasingly better. Consumers were being turned off by the cost of movie theaters and realizing that for an initial investment they could attain the same quality if not better at home. Also starting around the year 2000 HTiB (Home Theaters in a Box) started to make a comeback giving consumers a Hi-Fidelity surround sound experience. Unfortunately the quality of sound that comes from these systems is only slightly better than that of television by itself. Many consumers started to realize the benefits of having custom or high end systems put in their homes. This is where CES comes into play. The level of expertise required to properly install a home theater requires specialized knowledge and skills which the average consumer does not have. In order to fully utilize the high end electronics that they want in their homes consumers must rely on professional installers. C3: Competitive Analysis: In the North Ogden area our competition comes from big box stores and other local independent installers. Our biggest competitors are Best Buy and Rc Willey. Both of these big box stores offer reasonable prices on consumer electronics and have installation services. They have a well-known presence in the market and a large budget for advertising. We will never be able to compete on the same level as a big box store when it comes to volume of electronic products sold, but we do offer a more customizable experience to the consumer that will give us a good portion of the market share. Rc Willey and Best Buy do not offer installation of custom lighting systems or home automation. They also do not offer installation services that require running wire and cables in preexisting walls they can bring the electronics to you and connect all of the cables, but they wont do more than that. This fortunately gives us a little niche in the market that will make us stand out from them. Brand recognition is one of the biggest hurdles that a new entrant to the market faces. When someone is deciding on having their home theater installed they will be more inclined to go with the company they recognize because they have been around for a long period of time and have a tangible track record of service. The advantage that CES will have in this market is our one on one relationship with the customers we will be with them through every step of the process. From the initial assessment of the home, to the ordering of the products, the final installation, and any follow up visits if necessary. We will be able to get to know each customer personally to best tailor our services to their needs.Market StrategyD1: 4Ps:Product: The Company will offer basic to custom installation services for home theater and home automation systems. We offer competitive prices on consumer electronics and installation services we have a small markup for components, but will rely more on our installation services for profit. Pricing: We have set a flat rate for many of our services. And for components we add 10% above our cost. When we consider the price of whole system installations we require an evaluation of the home so we can give an accurate cost bid and time frame for the services. We have two pricing structures in place one for consumers who purchase their electronics with us, and another for those who only require installation services. Our pricing for installation services will remain firm. Any pricing negotiations can be made with our markup costs on the components. Because our entire staff is skilled in installation and calibration we are all able to wear may hats and reduce our overhead on employee compensation. This translates into cost that are significantly lower than our competitors without sacrificing our profit margin. Promotion: During our startup we will utilize the promotion from our displays set up in the Pectol Homes model homes. This will promote our products and services to consumers who are looking into new home construction. Even if they dont choose a Pectol home they will have been exposed to our company and we will come to mind when considering a home theater. During the first 4 months we will offer an incentive to customers of $150 off whole home packages over $1500 and $600 off packages over $5000. We have set up our website www.cesutah.com with information about the company and galleries of our past installations. Through our webhost we have set up google analytics and have purchased geographic online real-estate that will put our company at the top for searches for Home Theaters and other related search terms. We have also joined together with many other local companies and have offered to give free advertisement for them in exchange for the same. Placement (Distribution): As a company we will rely heavily on the sales we receive from new home construction by Pectol Homes. We will receive a good amount of foot traffic through the model homes that have our theaters and automation systems installed. Even people who are just walking through to see the latest in new homes will be exposed to our product and will associate our name with the quality that they saw in the model home.D2: Price List:Develop a price list for the products/services offered.ServiceService DescriptionPrice with hardware purchasePrice w/o hardware purchaseBasic Television SetupSetting up television and connecting basic components. Cable/satellite, DVD/Blu-ray player, and/or streaming devices.$14.99$74.99Basic Surround Sound System SetupInstallation of A/V receiver and surround sound speakersFree$74.99In wall wiring for existing construction.Placement of wiring for a/v equipment in established walls in an existing construction environment.$0.99 per linear foot$2.25 per linear footIn wall wiring for new constructionInstallation of a/v wiring where walls are not covered with sheetrock.$0.25Per linear foot$0.75Per linear footWall mounting of televisionPlacement of a wall mount and television on a wall or other vertical surface.$14.99$49.99Home Theater/Automation assessment planA detailed assessment and plan of the home theater/automation design. Including physical measurements, acoustic analysis, electrical requirements and price bid.$149.99 (Subtracted from final cost if system is purchased)N/AService callsIn home service visit for repair, diagnosis, and system adjustmentsFree for the first 3 months$49.99 plus parts after that$74.99 plus partsCustom Home TheaterDesign, construction, and installation of custom/semi-custom home theaterBid OnlyN/ACustom Home Automation systemDesign, construction, and installation of custom home automation systemBid OnlyN/AComprehensive Home Theater audio calibrationA comprehensive audio calibration based on customer preferences with 2 follow up calibration visits$79.99$199.99D3: Selling Strategy: In order to have the first year go as smooth as possible we will strive to meet the following milestones to ensure our success. These milestones are fluid and can be adjusted to fit our current needs. Every quarter we will reevaluate our milestones and goals to ensure that we are headed in the direction that we want.EventMilestoneResponsible PartyWebsite Operational90 Days prior to start-upInstallation ManagerVehicle Wraps for work vehicles (2)90 Days Prior to start-upOwnersInventory Stocked90 days prior to start-upOwners/Installation ManagerFirst 3 model home installations completed.60 Days prior to start-upInstallation ManagerInstallation Follow-upsBi-weeklyOwnersHire part time installersAfter first year of operation OwnersTrain all employees on new trends and advances in the Home Theater/Automation field.Semi annuallyInstallation ManagerWe plan on selling our customers a lifestyle that they never knew they wanted. We plan to show them that the best way to experience movies is in the comfort of their own home with a picture and sound quality that equals or surpasses that of the local theater. We also want to sell them on the convenience and security of having their home fully automated. We know that once we get them to experience this they will spread the word to their friends and family. We feel confident that the quality and competitive cost of our services will be made known to the public at large, and we will soon be the go to company who will only be imitated but never duplicated in the level of service we provide.D4: Sales Forecast: In our first year CES plans to become the biggest name in home theater installation in Northern Utah. We have low overhead costs which will allow us to focus our attention on quality installations and customer service without the risk of carrying large costs. Disposable income is a term that is finally making a comeback and in our market we know that with the new home growth and economic upswing we will be able to get a good portion of the market to seek our services. The growth of the home theater/automation market is rising steadily and with our advertising and word of mouth recommendations we feel that our sales will begin to parallel the market growth. Our presence in the new home community and referrals from other companies will help increase our sales. We feel that within the first 6 months we will reach the point where we are running at full capacity. It may require the addition of part time employees to assist in the installations. This will be considered after the first year of operation.Depending on the individual job we are performing it might take 1 hour to 3 weeks to complete and install. For whole home installs on new construction we will be able to work in stages depending on the phase the home construction is in. For an existing home we will be able to work 1-3 days straight through to finish an install. We project that we can complete 7-10 new construction installs, and 50-70 single component or simple installations every month. This is our end of year goal. Our sales forecast has been based on the low number of our projections.The below table will show our projected installations for the first year. It will highlight our targets and goals. We do not work on Sundays or state and federal holidays. TargetWhole Home Installations per monthMisc Service CallVisits per monthJanuary315February315March420April620May625June730July730August740September740October740November840December845Implementation Strategy E1: Overall Strategy: CES will focus on bringing a service that previously has been limited to big box stores to the Weber County area. Our targeted market is the 25-55 year old market with a $45,000+ annual income who are early adopters of technology. We will market ourselves as the best choice for home electronics integration and home theaters with service and quality that will not be matched. We cater to all income levels and base all of our installation services on their budget. We can do a $100,000 fully custom dream theater to a simple $1,500 home theater in a box. All customers will be treated with the same level of respect and courtesy. All of our target dates and projections have given consideration to issues that may arise and have been decided upon using conservative planning methods. Our main focus in our first year is to build a strong relationship in our community and become a trusted company. Because we will be relying heavily on new home construction we will have a constant flow of new potential customers. E2: Implementation: CES will officially be open once all necessary licenses have been procured. We want to provide home theater solutions and home automation services to the residents of Weber county and surrounding areas. We will provide our services in a professional and timely manner. In order for us to see our vision come to life we have created the following objectives:Objective 1: Obtain a business license from North Ogden City.This will be done by 12/31/2014Objective 2: Activate website and begin online and local advertisement.Website will be up and running by 10/15/2014Objective 3: Obtain liability insurance and workers compensation insurance on our home office and all employees in case of workplace injury.Coverage will be obtained by 11/1/2014Objective 4: Stock our inventory with necessary office supplies and installation supplies.Inventory will be stocked during the first week of November Objective 5: Open office and showroom location.Showroom and office will officially open on 1/2/2015Objective 6: Install Automation and Theater systems in the model homes.The first two model homes will be completed by 11/15/2014Objective 7: Hire additional part time installers when demand facilitates.The date on this is TBD depending on need.Objective 7: Normalize day to day operations and focus on increasing the customer base over the next three years.E3: Control Plan: In order to meet our goals and objectives we will place the following controls in place:Scheduled Audits- Every month we will contact past customers and inquire about the satisfaction, quality, and professionalism they received from CES. During the install they will be notified about this process so they are not caught off guard.Financial review- bi weekly there will be a review of all financial aspects of the company to ensure all obligations are being met and funds are being used appropriately. Every year an outside accountant will review our financials as an objective third party.Inventory review- At the beginning of every week or before a big job our installation specialist will assess our inventory and place orders for any supplies that we may need.Schedule Checks- Every morning we will take the first 5 minutes and go over our daily schedules making sure we are all on the same page and that there is no overlapping of resources. This will also be an opportunity to bring up any issues or concerns that need to be resolved.Outside vendor review-Semiannually we will review our interactions with our outside venders that we associate with making sure that we are using the best possible resources.Financial Statements and ProjectionsF1: Revenue and Cost Estimate:CES will operate at a slight loss for the first month of operations due to the costs of installing 3 demo systems in the model homes. After the first month we start to turn a profit. By the end of the first year we are expected to net $199,007.60 in profits. This is using conservative estimates on our sales forecast and liberal estimates on our costs.F2. Forecasted Profit and Loss Statement F3: Forecasted Balance Sheet: G1: Financial Projections:CES will operate under the following assumptions:Startup costs were funded by the sale of an investment real estate property which allows us to operate without interest and business loans.There are no costs for rent or storage as the business is ran out of my personal residence.Online Advertising and Website functionality will be present before the opening of the business.For the first year there will be no payroll costs as all employees are salaried.Because of the small staff there will be no vacation time set aside for the owners and limited time for the Installer. This will change after the first year of operation.Quarterly Tax preparation will be handled by Wendy Thompson and will not require any additional costs as she is an owner. G1a- Breakeven Point- CES requires very little overhead costs for startup thus making it relative easy to meet the breakeven point early on in the venture. The breakeven point occurs early in February it would have taken place earlier in January if not for the additional cost of the model home theaters. The below chart illustrates the point that we break even. When you look at the total expenditure for February of $12,956.76 versus the total revenue of $21,597.00 it is apparent that the break even took place during this month.G1b-Financial Position:The financial position of CES is extraordinary. Per the forecasted first year the company shows a net profit of $199,007.60. And according to the balance sheet the owners equity is $243,557.60. This puts the company in a great position for expansion and the addition or more employees in the future. G1c-Capital/Investment Needs: In order to start up the business it will require $59,098.00. A business account has been set up with $60,000 to cover startup costs with and additional $33,000 in cash has been set aside to deal with gaps in purchasing and payment for services. The below chart goes into detail the amounts needed for startup costs:ReferencesConstable, G., & Somerville, B. (2003, October). Household Appliances Timeline - Greatest Engineering Achievements of the Twentieth Century. Retrieved January 17, 2015, from http://www.greatachievements.org/?id=3768Infiniti Research Limited. (2014, May 1). Global Home Audio Market 2014-2018 17737 - Sandler Research. Retrieved January 23, 2015, from http://www.sandlerresearch.org/global-home-audio-device-market-2014-2018.html" http://www.sandlerresearch.org/global-home-audio-device-market-2014-2018.htmlO'Donnell, J. (2011, January 1). Home theater gear is a booming business - USATODAY.com. Retrieved January 23, 2015, from http://usatoday30.usatoday.com/tech/products/2011-01-04-home-theater-gear_N.htm" http://usatoday30.usatoday.com/tech/products/2011-01-04-home-theater-gear_N.htmUS Census Bureau. (2014, December 4). Weber County QuickFacts from the US Census Bureau. RetrievedJanuary1, 2015, from http://quickfacts.census.gov/qfd/states/49/49057.html