Situation Analysis
JavaNet just opened its doors for business a little over a month ago. Business is good, and customers have been impressed with our offerings, but we need to focus our efforts on implementing the strategies, programs, and tactics outlined in the original business plan.
Differentiating ourselves from other more traditional cafes has given us the ability to effectively compete on the beverage and pastry side of the business with the already entrenched competition. Sales are brisk and in-line with projections.
The Internet services side of the business is rapidly being accepted by the local community. Memberships are meeting the projections outlined in the business plan, and sales of Internet services are meeting the goals forecast. Students love to gather for late-night sessions, nearby seniors are getting a glimpse of what the Internet offers, and local business people love to stop by for a quick bite and an email check.
Market Summary
JavaNet is faced with the exciting opportunity of being the first-mover in the local cyber-cafe market. The consistent popularity of coffee, combined with the growing interest in the Internet, has been proven to be a winning concept in other markets and will produce the same results here.
All three target markets for the JavaNet service are growing at a relatively fast pace. We're faced with a large number of potential customers, and we're offering a needed service.
Target Market Growth:
• University students continue to grow at a steady pace, at nearly 4%
• Office workers in the downtown area and nearby professional buildings continue to add value, growing at 3%
• Seniors are becoming an important part of downtown business, growing at almost 6%
• Teens continue to play a major role in downtown foot-traffic, growing at 2%
Market Demographics
JavaNet's customers can be divided into two groups. The first group is familiar with the Internet and desires a progressive and inviting atmosphere where they can get out of their offices or homes to enjoy a great cup of coffee and Internet access. This group is made up of students from the University of Oregon and business people from nearby downtown offices and professional centers.
The second group is not as familiar with the Internet. This group is made up of seniors from the downtown retirement centers. There are three large retirement centers in the downtown area, and currently none of them offer Internet access to their residents. Seniors represent a growing segment of Internet users. They use the Internet to communicate with friends and family and they will be regular users of the JavaNet service.
Market Analysis
2001 2002 2003 2004 2005
Potential Customers Growth CAGR
University Students 4% 10,000 10,400 10,816 11,249 11,699 4.00%
Office Workers 3% 20,000 20,600 21,218 21,855 22,511 3.00%
Seniors 6% 3,000 3,180 3,371 3,573 3,787 6.00%
Total 3.59% 33,000 34,180 35,405 36,677 37,997 3.59%
Market Needs
Factors, such as addiction, and historical sales data ensure that the high demand for coffee will remain constant over the next five years.
The rapid growth of the Internet and online services that has been witnessed worldwide is only the beginning of a long-lived trend towards an economy built on the infrastructure of the Internet. The potential growth of the Internet is enormous, to the point where one day, a computer terminal with an online connection will be as common and necessary as a telephone or toilet. This may be 5 or 10 years down the road, but for the next five years, the online service provider market is sure to experience tremendous growth. Establishing itself as the first cyber-cafe in the area, JavaNet will enjoy the first-mover advantages of name recognition and customer loyalty. Initially, JavaNet will hold a 100 percent share of the cyber-cafe market locally. In the next five years, competitors will enter the market. JavaNet has set a goal to consistently maintain a market share of greater than fifty percent.
Market Trends
The Internet has become a point of conversation in almost all social groups. People are talking about sites they visited, business people are talking about Internet-based businesses, and kids are talking about the latest Internet clubs and chat rooms. People like to communicate their Internet experiences with their friends, colleagues, and family. However, it can be difficult to do it in front of a computer terminal at the office or in the family study. A comfortable place to gather and share these experiences is becoming a real need.
JavaNet will provide:
• A meeting place for business people interested in sharing their Internet-based business ideas.
• A social hub for students and young people interested in sharing a beverage and their Internet experiences with friends.
• A place for nearby seniors to gather and learn about the powers of the Internet and better communication methods.
• A stopping point for travelers in need of an Internet connection.
A market survey was conducted in the Fall of 1998. Key questions were asked of fifty potential customers. Some key findings include:
• 35 subjects said they would be willing to pay for access to the Internet.
• $2.50 an hour was the most popular hourly Internet fee.
• 24 subjects use the Internet to communicate with others on a regular basis.
Market Growth
The market for the services JavaNet will offer is growing rapidly. The cyber-cafe hasn't come to this area yet, but similar services are growing rapidly on a global scale. Large cities that cater to large numbers of travelling business people and tourists have been saturated with businesses offering the services JavaNet will offer. Business people use the Internet services to catch up on email and communications with their family, and tourists do the same. Our area supports a population that has many of the same needs and interests of this larger group.
The student population continues to grow as the University grows in popularity with high-school graduates from out of state. These students tend to have money and an interest in up-scale social centers. Business in the downtown area is on the rise with the coming completion of the renovated Fifth Street Market and the new Compu-tech facility. JavaNet will target these groups with radio and TV spots on local stations.
Strengths
1. Knowledgeable and friendly staff. We've gone to great lengths at JavaNet to find people with a passion for teaching and sharing their Internet experiences. Our staff is both knowledgeable and eager to please.
2. State-of-the art equipment. Part of the JavaNet experience includes access to state-of-the-art computer equipment. Our customers enjoy beautiful flat-screen displays, fast machines, and high-quality printers.
3. Up-scale ambiance. When you walk into JavaNet, you'll feel the technology. High backed mahogany booths with flat-screen monitors inset into the walls provide a cozy hideaway for meetings and small friendly gatherings. Large round tables with displays viewable from above provide a forum for larger gatherings and friendly "how-to" classes on the Internet. Aluminum track lighting and art from local artists sets the mood. Last, but not least, quality cappuccino machines and a glass pastry display case provide enticing refreshments.
4. Clear vision of the market need. JavaNet knows what it takes to build an upscale cyber cafe. We know the customers, we know the technology, and we know how to build the service that will bring the two together.
Weaknesses
1. A dependence on quickly changing technology. JavaNet is a place for people to experience the technology of the Internet. The technology that is the Internet changes rapidly. Product lifecycles are measured in weeks, not months. JavaNet needs to keep up with the technology because a lot of the JavaNet experience is technology.
2. Cost factor associated with keeping state-of-the-art hardware. Keeping up with the technology of the Internet is an expensive undertaking. JavaNet needs to balance technology needs with the other needs of the business. One aspect of the business can't be sacrificed for the other.
Opportunities
1. Growing population of daily Internet users. The importance of the Internet almost equals that of the telephone. As the population of daily Internet users increases, so will the need for the services JavaNet offers.
2. Social bonds fostered by the new Internet communities. The Internet is bringing people from across the world together unlike any other communication medium. JavaNet will capitalize on this social trend by providing a place for smaller and local Internet communities to meet in person. JavaNet will grow some of these communities on its own by establishing chat areas and community programs. These programs will be designed to build customer loyalty.
Marketing Objectives
JavaNet's marketing objectives for the first three years of operation include:
• Grow total sales by 10% annually.
• Diversify the service offering to insulate the business against fluctuations in any one component of the revenue stream.
• Build customer loyalty through educational programs.
• Maintain a staff of enthusiastic employees excited to share their Internet knowledge with JavaNet customers.
• Build the JavaNet brand to the point where it becomes a household word in the area.
Financial Objectives
The goal of this marketing plan is to outline the marketing strategies, tactics, and programs that will make the vision outlined in the JavaNet business plan a reality in the year 2000. The vision outlined in the business plan includes sales of roughly $275,000 in the first year with that figure increasing 10% annually.
Positioning
JavaNet will position itself as an upscale coffee house and Internet service provider. Business people of all types will use JavaNet as a place to hold meetings and catch-up on email communications. Students from nearby downtown housing centers will use JavaNet as a place to socialize and discuss the latest Internet sites. Seniors from downtown retirement centers will experience the Internet for the first time at JavaNet. Programs designed to teach newcomers about the power of the Internet will help build customer loyalty and spread the word about the services JavaNet offers.
Marketing Mix
JavaNet's marketing efforts will focus on building a loyal base of customers that will use the services provided on an almost daily basis.
Services and Service Marketing
As the popularity of the Internet continues to grow at an exponential rate, easy and affordable access to the information superhighway is quickly becoming a necessity of life. JavaNet provides the local community with the ability to access the Internet, enjoy a cup of coffee, and share Internet experiences in a comfortable environment. People of all ages and backgrounds will come to enjoy the unique, upscale, educational, and innovative environment that JavaNet provides.
Pricing
JavaNet bases its prices for coffee and specialty drinks on the "Retail Profit Analysis" provided by our supplier, Allann Brothers Coffee Co., Inc. Allann Brothers has been in the coffee business for 22 years and has developed a solid pricing strategy.
Determining a fair market, hourly price for online use is more difficult because there is no direct competition from another cyber-cafe in our area. Therefore, JavaNet considered three sources to determine the hourly charge rate. First, we considered the cost to use other Internet servers, whether it is a local networking firm or a provider such as America Online. Internet access providers use different pricing schemes. Some charge a monthly fee, while others charge an hourly fee. In addition, some providers use a strategy with a combination of both pricing schemes. Thus, it can quickly become a high monthly cost for the individual. Second, JavaNet looked at how cyber-cafes in other markets such as Portland and Ashland went about pricing Internet access. Third, JavaNet used the market survey conducted in the Fall of 1998. Evaluating these three factors resulted in JavaNet's hourly price of $2.50.
Promotion
JavaNet will spend almost fifty thousand dollars in its first year of operations to build a brand and a loyal customer base. Marketing efforts will be focused on the local market, and the campaign will run the entirety of 1999, increasing roughly 10% per year to match increased sales revenue. The marketing budget will consistently equal almost 20% of sales.
A Few Specific Marketing Efforts:
• Local TV spots
• Print Materials
• Local Newspapers
• Local Radio Spots
• JavaNet Events
Service
This topic is a critical reminder of the fact that JavaNet is a service business. The success of our business depends upon the quality of the service we offer and delivering that service consistently. JavaNet is dedicated to delivering this quality service.
Dedicated to Quality Service Programs:
• We've gone to great lengths at JavaNet to find people with a passion for teaching and sharing their Internet experiences. Our staff is both knowledgeable and eager to please. An excess of staff members will consistently be on hand to provide service to JavaNet customers. Performance will be frequently evaluated both internally and through customer surveys.
• A highly valued member of the JavaNet staff will be the "Customer Happiness Representative." This individual will be available forty hours a week to monitor the level of happiness amongst JavaNet customers. This individual will be responsible for: developing customer satisfaction programs, monitoring happiness levels, responding to customer concerns, and the general well being of every JavaNet customer.
Break-even Analysis
JavaNet is operating in an industry capable of supporting high gross margins. Variable costs in relationship to per-unit revenues are low. Variable costs are equal to roughly 25% of per-units revenues. It is our hope that as we move into the future and continue to build relationships with our suppliers, this value will decrease further, approaching a value of 20%.
Fixed costs for JavaNet equal almost $7,500. Fixed costs include: payment of debt, facility lease costs, hardware costs, and other costs JavaNet must maintain on a monthly basis. These costs are fixed and aren't impacted by an increase or a decrease in sales.
Currently, JavaNet will break even at a monthly sales point of $10,000.
Break-even Analysis
Monthly Units Break-even 2,986
Monthly Revenue Break-even $10,002
Assumptions:
Average Per-Unit Revenue $3.35
Average Per-Unit Variable Cost $0.84
Estimated Monthly Fixed Cost $7,500
Sales Forecast
Revenues for the first year of operation are based on an almost 10% growth rate frommonth to month. This is an aggressive estimate, but we feel that our strong emphasis on marketing will have positive results. Annually, beyond the first year of operations, we're predicting a growth rate of roughly 10%. We'll have a better idea of potential growth rate beyond year one as we make our way through our first year. The plan will be updated as we receive more information.
Sales Forecast
2001 2002 2003 2004 2005
Unit Sales
Coffee (based on average) 16,230 17,853 19,639 21,602 23,763
Specialty Drinks (based on average) 9,129 10,042 11,047 12,151 13,366
E-mail Memberships 12,173 13,390 14,729 16,202 17,822
Hourly Internet Fees 60,255 66,280 72,908 80,199 88,219
Baked Goods (based on average) 54,777 60,255 66,280 72,908 80,199
Other 0 0 0 0 0
Total Unit Sales 152,564 167,820 184,602 203,062 223,368
Unit Prices 2001 2002 2003 2004 2005
Coffee (based on average) $1.00 $1.00 $1.00 $1.00 $1.00
Specialty Drinks (based on average) $2.00 $2.00 $2.00 $2.00 $2.00
E-mail Memberships $10.00 $10.00 $10.00 $10.00 $10.00
Hourly Internet Fees $2.50 $2.50 $2.50 $2.50 $2.50
Baked Goods (based on average) $1.25 $1.25 $1.25 $1.25 $1.25
Other $0.00 $0.00 $0.00 $0.00 $0.00
Sales
Coffee (based on average) $16,230 $17,853 $19,639 $21,602 $23,763
Specialty Drinks (based on average) $18,259 $20,085 $22,093 $24,303 $26,733
E-mail Memberships $121,726 $133,899 $147,289 $162,018 $178,219
Hourly Internet Fees $150,636 $165,700 $182,270 $200,497 $220,547
Baked Goods (based on average) $68,471 $75,318 $82,850 $91,135 $100,248
Other $0 $0 $0 $0 $0
Total Sales $375,323 $412,855 $454,141 $499,555 $549,510
Direct Unit Costs 2001 2002 2003 2004 2005
Coffee (based on average) $0.50 $0.50 $0.50 $0.50 $0.50
Specialty Drinks (based on average) $2.50 $2.50 $2.50 $2.50 $2.50
E-mail Memberships $0.63 $0.63 $0.63 $0.63 $0.63
Hourly Internet Fees $0.31 $0.31 $0.31 $0.31 $0.31
Baked Goods (based on average) $0.00 $0.00 $0.00 $0.00 $0.00
Other $0.00 $0.25 $0.25 $0.25 $0.25
Direct Cost of Sales
Coffee (based on average) $8,115 $8,927 $9,819 $10,801 $11,881
Specialty Drinks (based on average) $22,824 $25,106 $27,617 $30,378 $33,416
E-mail Memberships $7,669 $8,436 $9,279 $10,207 $11,228
Hourly Internet Fees $18,679 $20,547 $22,601 $24,862 $27,348
Baked Goods (based on average) $0 $0 $0 $0 $0
Other $0 $0 $0 $0 $0
Subtotal Direct Cost of Sales $57,286 $63,015 $69,317 $76,248 $83,873
Marketing Expense Budget
2001 2002 2003 2004 2005
Local TV Spots $23,000 $25,300 $27,830 $30,613 $33,674
Print Materials $6,750 $7,425 $8,168 $8,984 $9,883
Other $3,300 $3,630 $3,993 $4,392 $4,832
------------ ------------ ------------ ------------ ------------
Total Sales and Marketing Expenses $33,050 $36,355 $39,991 $43,990 $48,389
Percent of Sales 8.81% 8.81% 8.81% 8.81% 8.81%
Linking Sales and Expenses to Strategy
Our marketing expenses are tied directly to our sales revenue. As sales increase, the marketing expenses will increase. Currently our marketing expenses equal roughly 20% of sales, and we hope to increase that value in the future. Our programs will be monitored for efficiency and return on investment. Most notably, we want to pay close attention to the value of the "Customer Happiness Representative." This component of our marketing budget is expensive, and we want to track the value of the program to make sure we're optimizing our budget. Periodically, we will survey our customers to determine the effectiveness of our programs, and we'll adjust the marketing mix appropriately based on our findings.
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Sources: http://www.mplans.com/internet_coffee_shop_marketing_plan/situation_analysis_fc.php
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Market Demographics
JavaNet's customers can be divided into two groups. The first group is familiar with the Internet and desires a progressive and inviting atmosphere where they can get out of their offices or homes to enjoy a great cup of coffee and Internet access. This group is made up of students from the University of Oregon and business people from nearby downtown offices and professional centers.
The second group is not as familiar with the Internet. This group is made up of seniors from the downtown retirement centers. There are three large retirement centers in the downtown area, and currently none of them offer Internet access to their residents. Seniors represent a growing segment of Internet users. They use the Internet to communicate with friends and family and they will be regular users of the JavaNet service.
Market Analysis
2001 2002 2003 2004 2005
Potential Customers Growth CAGR
University Students 4% 10,000 10,400 10,816 11,249 11,699 4.00%
Office Workers 3% 20,000 20,600 21,218 21,855 22,511 3.00%
Seniors 6% 3,000 3,180 3,371 3,573 3,787 6.00%
Total 3.59% 33,000 34,180 35,405 36,677 37,997 3.59%
Market Needs
Factors, such as addiction, and historical sales data ensure that the high demand for coffee will remain constant over the next five years.
The rapid growth of the Internet and online services that has been witnessed worldwide is only the beginning of a long-lived trend towards an economy built on the infrastructure of the Internet. The potential growth of the Internet is enormous, to the point where one day, a computer terminal with an online connection will be as common and necessary as a telephone or toilet. This may be 5 or 10 years down the road, but for the next five years, the online service provider market is sure to experience tremendous growth. Establishing itself as the first cyber-cafe in the area, JavaNet will enjoy the first-mover advantages of name recognition and customer loyalty. Initially, JavaNet will hold a 100 percent share of the cyber-cafe market locally. In the next five years, competitors will enter the market. JavaNet has set a goal to consistently maintain a market share of greater than fifty percent.
Market Trends
The Internet has become a point of conversation in almost all social groups. People are talking about sites they visited, business people are talking about Internet-based businesses, and kids are talking about the latest Internet clubs and chat rooms. People like to communicate their Internet experiences with their friends, colleagues, and family. However, it can be difficult to do it in front of a computer terminal at the office or in the family study. A comfortable place to gather and share these experiences is becoming a real need.
JavaNet will provide:
• A meeting place for business people interested in sharing their Internet-based business ideas.
• A social hub for students and young people interested in sharing a beverage and their Internet experiences with friends.
• A place for nearby seniors to gather and learn about the powers of the Internet and better communication methods.
• A stopping point for travelers in need of an Internet connection.
A market survey was conducted in the Fall of 1998. Key questions were asked of fifty potential customers. Some key findings include:
• 35 subjects said they would be willing to pay for access to the Internet.
• $2.50 an hour was the most popular hourly Internet fee.
• 24 subjects use the Internet to communicate with others on a regular basis.
Market Growth
The market for the services JavaNet will offer is growing rapidly. The cyber-cafe hasn't come to this area yet, but similar services are growing rapidly on a global scale. Large cities that cater to large numbers of travelling business people and tourists have been saturated with businesses offering the services JavaNet will offer. Business people use the Internet services to catch up on email and communications with their family, and tourists do the same. Our area supports a population that has many of the same needs and interests of this larger group.
The student population continues to grow as the University grows in popularity with high-school graduates from out of state. These students tend to have money and an interest in up-scale social centers. Business in the downtown area is on the rise with the coming completion of the renovated Fifth Street Market and the new Compu-tech facility. JavaNet will target these groups with radio and TV spots on local stations.
Strengths
1. Knowledgeable and friendly staff. We've gone to great lengths at JavaNet to find people with a passion for teaching and sharing their Internet experiences. Our staff is both knowledgeable and eager to please.
2. State-of-the art equipment. Part of the JavaNet experience includes access to state-of-the-art computer equipment. Our customers enjoy beautiful flat-screen displays, fast machines, and high-quality printers.
3. Up-scale ambiance. When you walk into JavaNet, you'll feel the technology. High backed mahogany booths with flat-screen monitors inset into the walls provide a cozy hideaway for meetings and small friendly gatherings. Large round tables with displays viewable from above provide a forum for larger gatherings and friendly "how-to" classes on the Internet. Aluminum track lighting and art from local artists sets the mood. Last, but not least, quality cappuccino machines and a glass pastry display case provide enticing refreshments.
4. Clear vision of the market need. JavaNet knows what it takes to build an upscale cyber cafe. We know the customers, we know the technology, and we know how to build the service that will bring the two together.
Weaknesses
1. A dependence on quickly changing technology. JavaNet is a place for people to experience the technology of the Internet. The technology that is the Internet changes rapidly. Product lifecycles are measured in weeks, not months. JavaNet needs to keep up with the technology because a lot of the JavaNet experience is technology.
2. Cost factor associated with keeping state-of-the-art hardware. Keeping up with the technology of the Internet is an expensive undertaking. JavaNet needs to balance technology needs with the other needs of the business. One aspect of the business can't be sacrificed for the other.
Opportunities
1. Growing population of daily Internet users. The importance of the Internet almost equals that of the telephone. As the population of daily Internet users increases, so will the need for the services JavaNet offers.
2. Social bonds fostered by the new Internet communities. The Internet is bringing people from across the world together unlike any other communication medium. JavaNet will capitalize on this social trend by providing a place for smaller and local Internet communities to meet in person. JavaNet will grow some of these communities on its own by establishing chat areas and community programs. These programs will be designed to build customer loyalty.
Marketing Objectives
JavaNet's marketing objectives for the first three years of operation include:
• Grow total sales by 10% annually.
• Diversify the service offering to insulate the business against fluctuations in any one component of the revenue stream.
• Build customer loyalty through educational programs.
• Maintain a staff of enthusiastic employees excited to share their Internet knowledge with JavaNet customers.
• Build the JavaNet brand to the point where it becomes a household word in the area.
Financial Objectives
The goal of this marketing plan is to outline the marketing strategies, tactics, and programs that will make the vision outlined in the JavaNet business plan a reality in the year 2000. The vision outlined in the business plan includes sales of roughly $275,000 in the first year with that figure increasing 10% annually.
Positioning
JavaNet will position itself as an upscale coffee house and Internet service provider. Business people of all types will use JavaNet as a place to hold meetings and catch-up on email communications. Students from nearby downtown housing centers will use JavaNet as a place to socialize and discuss the latest Internet sites. Seniors from downtown retirement centers will experience the Internet for the first time at JavaNet. Programs designed to teach newcomers about the power of the Internet will help build customer loyalty and spread the word about the services JavaNet offers.
Marketing Mix
JavaNet's marketing efforts will focus on building a loyal base of customers that will use the services provided on an almost daily basis.
Services and Service Marketing
As the popularity of the Internet continues to grow at an exponential rate, easy and affordable access to the information superhighway is quickly becoming a necessity of life. JavaNet provides the local community with the ability to access the Internet, enjoy a cup of coffee, and share Internet experiences in a comfortable environment. People of all ages and backgrounds will come to enjoy the unique, upscale, educational, and innovative environment that JavaNet provides.
Pricing
JavaNet bases its prices for coffee and specialty drinks on the "Retail Profit Analysis" provided by our supplier, Allann Brothers Coffee Co., Inc. Allann Brothers has been in the coffee business for 22 years and has developed a solid pricing strategy.
Determining a fair market, hourly price for online use is more difficult because there is no direct competition from another cyber-cafe in our area. Therefore, JavaNet considered three sources to determine the hourly charge rate. First, we considered the cost to use other Internet servers, whether it is a local networking firm or a provider such as America Online. Internet access providers use different pricing schemes. Some charge a monthly fee, while others charge an hourly fee. In addition, some providers use a strategy with a combination of both pricing schemes. Thus, it can quickly become a high monthly cost for the individual. Second, JavaNet looked at how cyber-cafes in other markets such as Portland and Ashland went about pricing Internet access. Third, JavaNet used the market survey conducted in the Fall of 1998. Evaluating these three factors resulted in JavaNet's hourly price of $2.50.
Promotion
JavaNet will spend almost fifty thousand dollars in its first year of operations to build a brand and a loyal customer base. Marketing efforts will be focused on the local market, and the campaign will run the entirety of 1999, increasing roughly 10% per year to match increased sales revenue. The marketing budget will consistently equal almost 20% of sales.
A Few Specific Marketing Efforts:
• Local TV spots
• Print Materials
• Local Newspapers
• Local Radio Spots
• JavaNet Events
Service
This topic is a critical reminder of the fact that JavaNet is a service business. The success of our business depends upon the quality of the service we offer and delivering that service consistently. JavaNet is dedicated to delivering this quality service.
Dedicated to Quality Service Programs:
• We've gone to great lengths at JavaNet to find people with a passion for teaching and sharing their Internet experiences. Our staff is both knowledgeable and eager to please. An excess of staff members will consistently be on hand to provide service to JavaNet customers. Performance will be frequently evaluated both internally and through customer surveys.
• A highly valued member of the JavaNet staff will be the "Customer Happiness Representative." This individual will be available forty hours a week to monitor the level of happiness amongst JavaNet customers. This individual will be responsible for: developing customer satisfaction programs, monitoring happiness levels, responding to customer concerns, and the general well being of every JavaNet customer.
Break-even Analysis
JavaNet is operating in an industry capable of supporting high gross margins. Variable costs in relationship to per-unit revenues are low. Variable costs are equal to roughly 25% of per-units revenues. It is our hope that as we move into the future and continue to build relationships with our suppliers, this value will decrease further, approaching a value of 20%.
Fixed costs for JavaNet equal almost $7,500. Fixed costs include: payment of debt, facility lease costs, hardware costs, and other costs JavaNet must maintain on a monthly basis. These costs are fixed and aren't impacted by an increase or a decrease in sales.
Currently, JavaNet will break even at a monthly sales point of $10,000.
Break-even Analysis
Monthly Units Break-even 2,986
Monthly Revenue Break-even $10,002
Assumptions:
Average Per-Unit Revenue $3.35
Average Per-Unit Variable Cost $0.84
Estimated Monthly Fixed Cost $7,500
Sales Forecast
Revenues for the first year of operation are based on an almost 10% growth rate frommonth to month. This is an aggressive estimate, but we feel that our strong emphasis on marketing will have positive results. Annually, beyond the first year of operations, we're predicting a growth rate of roughly 10%. We'll have a better idea of potential growth rate beyond year one as we make our way through our first year. The plan will be updated as we receive more information.
Sales Forecast
2001 2002 2003 2004 2005
Unit Sales
Coffee (based on average) 16,230 17,853 19,639 21,602 23,763
Specialty Drinks (based on average) 9,129 10,042 11,047 12,151 13,366
E-mail Memberships 12,173 13,390 14,729 16,202 17,822
Hourly Internet Fees 60,255 66,280 72,908 80,199 88,219
Baked Goods (based on average) 54,777 60,255 66,280 72,908 80,199
Other 0 0 0 0 0
Total Unit Sales 152,564 167,820 184,602 203,062 223,368
Unit Prices 2001 2002 2003 2004 2005
Coffee (based on average) $1.00 $1.00 $1.00 $1.00 $1.00
Specialty Drinks (based on average) $2.00 $2.00 $2.00 $2.00 $2.00
E-mail Memberships $10.00 $10.00 $10.00 $10.00 $10.00
Hourly Internet Fees $2.50 $2.50 $2.50 $2.50 $2.50
Baked Goods (based on average) $1.25 $1.25 $1.25 $1.25 $1.25
Other $0.00 $0.00 $0.00 $0.00 $0.00
Sales
Coffee (based on average) $16,230 $17,853 $19,639 $21,602 $23,763
Specialty Drinks (based on average) $18,259 $20,085 $22,093 $24,303 $26,733
E-mail Memberships $121,726 $133,899 $147,289 $162,018 $178,219
Hourly Internet Fees $150,636 $165,700 $182,270 $200,497 $220,547
Baked Goods (based on average) $68,471 $75,318 $82,850 $91,135 $100,248
Other $0 $0 $0 $0 $0
Total Sales $375,323 $412,855 $454,141 $499,555 $549,510
Direct Unit Costs 2001 2002 2003 2004 2005
Coffee (based on average) $0.50 $0.50 $0.50 $0.50 $0.50
Specialty Drinks (based on average) $2.50 $2.50 $2.50 $2.50 $2.50
E-mail Memberships $0.63 $0.63 $0.63 $0.63 $0.63
Hourly Internet Fees $0.31 $0.31 $0.31 $0.31 $0.31
Baked Goods (based on average) $0.00 $0.00 $0.00 $0.00 $0.00
Other $0.00 $0.25 $0.25 $0.25 $0.25
Direct Cost of Sales
Coffee (based on average) $8,115 $8,927 $9,819 $10,801 $11,881
Specialty Drinks (based on average) $22,824 $25,106 $27,617 $30,378 $33,416
E-mail Memberships $7,669 $8,436 $9,279 $10,207 $11,228
Hourly Internet Fees $18,679 $20,547 $22,601 $24,862 $27,348
Baked Goods (based on average) $0 $0 $0 $0 $0
Other $0 $0 $0 $0 $0
Subtotal Direct Cost of Sales $57,286 $63,015 $69,317 $76,248 $83,873
Marketing Expense Budget
2001 2002 2003 2004 2005
Local TV Spots $23,000 $25,300 $27,830 $30,613 $33,674
Print Materials $6,750 $7,425 $8,168 $8,984 $9,883
Other $3,300 $3,630 $3,993 $4,392 $4,832
------------ ------------ ------------ ------------ ------------
Total Sales and Marketing Expenses $33,050 $36,355 $39,991 $43,990 $48,389
Percent of Sales 8.81% 8.81% 8.81% 8.81% 8.81%
Linking Sales and Expenses to Strategy
Our marketing expenses are tied directly to our sales revenue. As sales increase, the marketing expenses will increase. Currently our marketing expenses equal roughly 20% of sales, and we hope to increase that value in the future. Our programs will be monitored for efficiency and return on investment. Most notably, we want to pay close attention to the value of the "Customer Happiness Representative." This component of our marketing budget is expensive, and we want to track the value of the program to make sure we're optimizing our budget. Periodically, we will survey our customers to determine the effectiveness of our programs, and we'll adjust the marketing mix appropriately based on our findings.
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Sources: http://www.mplans.com/internet_coffee_shop_marketing_plan/situation_analysis_fc.php
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