Auto Aftermarket Supplier Exchange

Published Date: 02 Nov 2017

Programme: Master of Communication Management

Module 4: Economics and Marketing

Module Lecturer: Mr. Issa NKUSI

A PROPOSAL FOR RWANDA AUTO-AFTERMARKET SUPPLIER EXCHANGE

Presenter: Louis de Montfort NDUWAYEZU

Reg No: PG20131004

Submission date: 25/1/2013

DECLARATION

I, hereby, declare that this document is original and does not contain material published elsewhere. It is my own research work and it has never been presented in any University or other Institution of Higher Learning. No other person’s work has been relied upon or used without due acknowledgement in the main text or references of this assignment document.

Louis de Montfort NDUWAYEZU.

EXECUTIVE SUMMARY

This is a business management solution for automotive aftermarket distributors enabling Sar Motors, Akagera Motors to dramatically improve purchasing and stocking decisions based on Rwanda and regional demand for specific parts; to help them increase operational efficiency and ensure a superior customer experience.

This platform allows Sar Motors and Akagera Motors’ users to enhance their buying and stocking practices well beyond the limits associated with spreadsheet analysis. This will improve distributors and store operators achieve the same level of category intelligence that has driven the success of mass-market retailers.

Today the World’s society is changing its way of dealing with the marketing from physical market to something virtual but practical ‘internet business management applications" and this embrace the term" software as service (SaaS). We can see with facts that the automotive industry is experiencing significant changes in global market volumes with the use of Internet applications (particularly automotive distributors).

RAASE.com (Rwanda Auto-Aftermarket Supplier Exchange) is a startup company which bring business Internet solutions to the automotive distributors here in Rwanda by provide solutions that help them become more successful and leader in their industry area.

Sar Motors, Akagera Motors, have recently welcomed the RAASE.com (Rwanda Auto-Aftermarket Supplier Exchange) in the internet-line exchange to allow them to channel their efforts through a single exchange and reduce overall inventories, develop industry standards, and provide productivity to all participants. RAASE.com, come as new service launched by Sar Motors, Akagera Motors (this alliance stating between them but it can accept others auto company) will specialize in e-commerce and business-to-business applications and will be targeted towards automotive aftermarket large-scale distributors.

RAASE.com’s goal is to become pioneer applications service providers in automotive aftermarket Internet applications in Rwanda, a concept that has so far only been attempted by general web houses that don't necessarily understand the complexity of the industry.

RAASE.com will have two databases hosted on Broadband System Corporation (BSC Rwanda) servers that will allow consumers and other businesses to look up parts by the manufacturers' part number, or by application. This will enable the user to in effect look up parts in a virtual catalog. This offering will give us a distinct competitive advantage because it will reduce startup costs for our customers dramatically.

As will be discussed further, the numbers in the first year are also based on lagging startup sales in the first 6 months. We are expecting some heavy development time to ensure that we are marketing the very best service. This is relatively positive because our overhead costs are low and our primary costs are our salaries.

TABLE OF CONTENT

GENERAL BACKGROUND

Rwanda is a small land locked and among the highest populated country in East African Community, covering 26,338 square kilometers. The Population density (people per sq. km) in Rwanda is at 430.64 (trading economics, 2012) [1] . Rwanda continues to be one of the fastest growing African countries in ICT and there are several avenues for growth for the ICT sector – from e-commerce and e-services, mobile technologies, applications development and automation to becoming a regional center for the training of top quality ICT professionals and research. A robust ICT industry can create wealth, jobs and entrepreneurs.

The Government of Rwanda introduced about reforms to ease doing business in the country. It now takes 1 day to start business compared to 45-days average on the African continent, and 13-days for the rich countries to start a business [2] (gov.rw, 2012). With the Objective of contribute to lower prices for Internet connectivity and to expand the geographic reach of ICT applications all over the country.

Rwanda constructed also a state of-the-art data hosting facility for public and private sector institutions that will ensure data safety, data protection and reliable service delivery.

There is no doubt that the Internet has become an integral part of the Rwandan culture. Though it appears that the automotive aftermarket has been behind the times. With recent announcements in the automobile industry, it is evident that the automotive aftermarket will be receiving a full reality check on their competitiveness through the Internet.

Vision

Our vision is to become "

The regional leader in automotive aftermarket Internet business solutions and a high-level knowledge in the e-commerce market and clearinghouse for all automotive part transactions on the web"

Mission

Our mission is "

To provide our clients with business solutions this helps them become more successful and a leader in their industry.

It is critical for us to be a pioneer and leader in automotive aftermarket Internet business solutions by providing our clients with services that help them and their customers become more successful.

Objectives

Create a service that:

Helps automotive distributors link to the online environments that are most beneficial to their business, as easily as possible.

Provides "one-stop shopping" for clients' e-commerce service needs (including hosting)

Always uses and provides the best available resources

Produce Sales of 45,253,000 rwf in 2013 and over 92,890,000 rwf by 2015.

Getting Net income more than 14 % of sales by the third year.

Keys to Success

RAASE.com is specifically specialized in automotive aftermarket suppliers exchange using web channel. While other consulting firms in the region offer web solutions on a broad base, there are none that we know in the region of who specialize in this area. With today's unpredictable economic environment within the automotive aftermarket, it is consistently difficult for companies to successfully keep in business and remain profitable. What we are going to offer will differ from our competitors in that RAASE.com will offer creative, innovative, and effective solutions. We realize that business problems within a particular industry have a variety of solutions; what may be right for one business in a particular industry would not necessarily meet the needs of another business in another industry. This will be our distinct competitive advantage. We realize and understand the complex nature of the market, and it is that fact that enables us to give the highest quality services to our customers.

Company summary

RAASE.com is a new established company by SAR motors and Akagera Motors to provide high-level knowledge in the e-commerce market. It will offer two main services to our clients:

Business-to-business and business-to-consumer e-commerce solutions for the aftermarket, enabling companies to more effectively sell their parts worldwide.

Customized web-based design.

Start-up Summary and assets needed

Total start-up expenses including hardware, software, furniture, miscellaneous supplies, and initial rent and salaries comes to 13,970,350 rwf. All shareholders will be contributing a total of 10,000,000 rwf to the business.

 

Start-up Expenses

amount (rwf)

 

Legal

100,000

Stationery, etc.

554,900

Brochures

751,500

Salaries - 3 months

3,750,000

Furniture

2,000,000

Rent - 3 months

2,100,000

Software

581,150

Software License

2,032,000

Travel &Transport

1,000,000

Start-up Expenses

290,000

Expensed Equipment

810,800

Total Start-up Expenses

13,970,350

 

Start-up Assets Needed

 

 

Cash Requirements

0

Other Short-term Assets

 

Total Short-term Assets

0

Long-term Assets

4,130,000

Total Assets

4,130,000

Total Start-up Requirements

18,100,350

 

Left to finance:

0

Start-up Funding Plan

 

Investment

 

shareholders

10,000,000

Other

0

Total investment

10,000,000

 

Short-term Liabilities

 

 

Unpaid Expenses

0

 

Short-term Loans

0

 

Interest-free Short-term Loan

0

 

Subtotal Short-term Liabilities

0

 

Long-term Liabilities

12,000,000

Total Liabilities

12,000,000

 

Loss at Start-up

(13,970,350)

 

Total Capital

(3,970,350)

 

Total Capital + Liabilities

8,029,650

Company Locations and Facilities

To keep our overhead costs low, RAASE.com will be located at telecom house nearly BSC data center. This technological Centre is located in Kigali town and has meeting rooms, telephone services, copier and fax services, basic services, fixed utilities (included in rent), and it will be easy to manage our servers.

SERVICES ANALYSIS

RAASE.com will offers the expertise an automotive aftermarket corporation needs to have to develop their product distribution in new and innovative ways. This may be through a full-blown e-commerce website (www.raase.com), with user-friendly interfaces and e-mail address.

Service Description

RAASE.com will offer Internet business management solutions to the automotive aftermarket distributors (the current proposal will start with Sar Motors and Akagera Motors for the first time). Primary services will include full scale e-commerce websites and business-to-business systems to address the growing concern for doing business with automobile distributors in Rwanda.

Sar Motors and Akagera Motors intend to combine their efforts to form a business-to-business integrated supplier exchange through a single global portal. This will create the world's largest virtual marketplace. It will be another example of how the Internet can transform every piece of our company and our industry.

What this means for the automotive distributors is that if a company wants to be a strategic supplier for any of the car manufacturers, It must have a business-to-business strategy in place on the Internet. This is where RAASE.com comes in. It will have all the tools required to interface by utilizing a cataloging and part number database. This will dramatically reduce their startup costs and implementation time, putting them ahead of their competition.

The company will host a database that will enable corporations to sell their products and services online to any audience. We will have a staff that will design the web pages to their specifications and the backend technology that enables clean and effective online cataloging and e-commerce transactions.

Our vision is to make RAASE.com a clearinghouse for all automotive part transactions on the web. This will require our customers to have an inventory management and ordering system already in place. Fortunately, just about most of distributors, and jobber in Rwanda have these systems in place.

We plan to supplement these larger solutions with web channels that don't at this time require an e-commerce service for small to medium-sized customers. Our product will be distinctive because we will have a graphic artist on staff with automotive aftermarket experience who can offer more creative artistic solutions than our competitors. Also, it will be to our customers' benefit to have their web page on RAASE.com because if they ever do want to conduct business online, the technology will already be in place.

These generally take less time and will be critical to the cash flow of RAASE.com. A professional purchasing manager will be investigating all avenues of research to find out if their supplier is offering the best products and services possible. It is our belief that this market research will take place online.

A feasibility study of the web channels environment will be conducted for each customer with any service we offer. It is important to RAASE.com that we help enhance the selling process of our customers. Our knowledge of Marketing and Project management, as well as the Internet, will be fully utilized to offer the best solution for our customer. It is our belief that we are not successful unless our customer is successful. The amount and type of customers that can benefit from an online system is limitless. We feel confident that once the customer spends the initial cost of getting on the Internet, both our companies will enjoy a profitable relationship by reaching more customers.

Sales Literature

The business will begin with a detailed corporate brochure establishing the different services RAASE.com will offer. It will quote various industry experts detailing what advantages other corporations have recognized after automating their supply chain. This brochure will be developed as part of the startup expenses.

Fulfillment

RAASE.com provides intellectual services and will employ three professionals with varying degrees of experience. One e-commerce professional with 5 plus years of experience will be hired for projects of medium to large magnitudes. A general web specialist will be hired with 3 years' industry experience for smaller applications as well as assisting the e-commerce professional. Also a graphic artist who has experience in the automotive aftermarket will be on staff so that RAASE.com can offer superior looking services. The physical reports will be formatted, printed and bound by the secretarial services. It is forecasted that another web specialist will be added in year two and another e-commerce professional will be added in year three.

Consideration of Technology

The enterprise server where the physical data will reside is a PowerEdge 8450 supplied by CISCO. It represents the highest performance in an industry-standard server. The machine we have selected comes with 4 Intel processors, 6 gigabyte RAM, and the Linux operating system. We will also add 4 1-terabyte hard drives every subsequent year.

We will also be utilizing a data pump to provide instant storage for our internal network; offers file storage and sharing on the network, distributing 150 gigabytes of data more quickly than if it was stored on a general-purpose file server.

RAASE.com will maintain the latest Windows and Macintosh capabilities including complete e-mail and corporate website on the Internet so that companies looking for our service will have a direct link to us. We will have equipment, including 3 HP Pavilion g6x series, 1 MacBook pro, top-of-the-line peripherals, interoffice network, and all the latest software. Software packages will include Macromedia Dreamweaver UltraDev for e-commerce, ColdFusion for web development, the Adobe Publishing Collection for graphic art, and Acid Pro for online digital music and video.

Security issues will be a major technological issue, especially with regard to the e-commerce sites we will set up for distributors. We will plan on using all the latest data encryption techniques available throughout the industry. We will also recommend that our customers look in to purchasing insurance to protect themselves against Internet hackers.

Future Services

We will continually expand our services based on industry trends and changing client needs. Some visionaries within the Internet industry believe that the Internet of the future will include utilities like cellular phones and others smart devices. The beauty is that for any of these items to interact over the Internet, a programmer's skills will be required. It will be critical for RAASE.com to stay abreast of all new technologies that will affect our customers.

MARKET ANALYSIS SUMMARY

RAAS will be focusing on distributors in the automotive aftermarket in Rwanda and of courses in the region that want to increase their competitive edge, especially when supplying the automobile industry, and open up communication lines with their customers.

Market Segmentation

Geographical segmentation

Region (East African community)

Population Density (Kigali, Kampala and Burundi)

City size (60% in kgli +,40% in Buja +20%kpla)

Climate (this three country have the same climate)

Demographic Segmentation

Age (young/ adult, married or single people)

Gender (men and women)

Occupation (public and private worker)

Social Class (company director, administrative or professional; intermediate managers, all kind of technicians; administrative or professional; supervisory, clerical, junior administrative or professional, skilled manual workers)

Family size (all size)

Religion (all)

Nationality(all)

Psychographic Segmentation

Lifestyle: Dependent (e.g., children still living at home with parents); Pre-family (with their own households but no children); Family (parents with at least one dependent child); and Late (parents with children who have left home, or older childless couples).

Degree of loyalty: all auto parts boutique; garages.

Behavioral segmentation

This segmentation will divides the market using (Occasions; Benefits Sought; Usage Rate; User Status; Loyalty Status and Buyer Readiness Stage segments. And this will used as the market will grow.

The rate used in geographic segmentation is based on statistics from trading economics, (2013).

Target Market Segment Strategy

The target markets that we will focus during this first year are Akagera motors SAR motors customers. Specifically the auto parts boutique and garages. Segmenting the automotive distributors will be done by determining who is primarily oriented to the consumer (do-it-yourself) and who is oriented towards the professional installer.

Market Trends

The world's major auto distributors are currently restructuring their operations. The parts manufacturers have responded to globalization by strategizing their operations to supply auto parts worldwide thus they have the representative in different countries including Rwanda in order to become more competitive. This in turn has changed the look of the automotive parts industry. Many automotive distributors have undergone strategic mergers and acquisitions in order to pool their resources and gain a competitive edge.

Market Growth

Domestically, firms have restructured themselves in an effort to maintain their competitive position in the region. This consolidation of the market to become more competitive plays a key role in the future growth of the industry and technology-driven with more and more government regulation. Many firms will become more competitive by automating their distribution chain.

Consulting participants range from major international name-brand consultants to tens of thousands of individuals. One of RAAS's challenges will be positioned as a relatively risk-free corporate purchase.

SWOT & PEST Analysis

SWOT analysis

This comprehensive analysis provides an in-depth strategic analysis of the company’s businesses and operations. It gives a clear and an unbiased view of the company’s key strengths and weaknesses and the potential opportunities and threats as well socio politico economic analysis.

STRENGTH

WEAKNESS

Technology innovation

Unique branding

Good customer relationships

New marketing strategy

Committed investors

High staff expertise

Excellent Marketing Strategy

Startup company

N customer

No office available

No material in place

Lack of market information

OPPORTUNITY

THREAT

Good governance

Expansion market (EAC)

Good support from government

Alliance between Akagera and Sar motors

One connected fiber optic

No enough penetration of IT

New threat entrant into the market

High general startup cost

Low IT regulations

No knowledge in e-payment

PEST analysis

POLITICAL

ECONOMICAL

ICT Policy and Regulation challenges

Favorable licensing framework

Open market

Government’s support for investment

Conducive regulations

Tax free for entry of the equipment

Stable democracy

ICT Business Taxation is free

Business is in line with world trade organisation laws and Regulations

Government attraction to private investors.

Low income earning population

Manageable size of the country

Low level of energy penetration

Global crisis

Inflation is stable

Energy is expensive( our market growth will be low)

Bank loan interest ranging between 10%-18%

SOCIAL

TECHNOLOGICAL

Low income distribution

The population lifestyle is not favoring the business

No competitive Internet service providers

Technological innovation and new discoveries

High speed technological transfer

STRATEGY & IMPLEMENTATION ANALYSIS

Competitors in the automotive aftermarket will not necessarily seek out Internet consultants who are focused towards the automotive aftermarket because, for all intents and purposes, they don't exist. This is the type of industry where RAASE.com must have an aggressive sales campaign with brochures, and advertisements in industry journals, and must be constantly making contacts.

Strategy Pyramids

Our main strategy is to emphasize the business-to-business automation, strive to become more competitive, especially with the automobile distributors. In a sense, we will be pioneering a relatively new market, so deviating from the strategy is not an option.

Underneath this strategy, our main tactics are utilizing industry experience, advanced technical knowledge based assets, and unparalleled communication and educational skills.

The other industry experience will aid us in understanding the customer and the customer's customer to bridge the communication gap between the jobber and professional installer. We will stay active in various trade organizations like the Automotive Distributors Association and the Automotive Parts and Accessories Association to build and maintain relationships throughout the industry. We will constantly maintain our presence by targeting customers based on industry knowledge first and technological skills second.

Our technological skills will help us get the job done after the program is sold. Part of a successful consulting business is to keep as close to the schedule as possible. It will be critical that our technical skills be excellent on projects. Otherwise, RAASE.com runs the risk of a tarnished reputation.

Our communication skills will be extremely important in educating the customer and the end user on how to utilize the system we have built. It is relatively easy to put together an Internet system that functions, but having the ability to educate the users is when the project is truly finished. Our focus on education will be another distinction of RAASE.com from the competition.

Value Proposition

One of our major value propositions is that RAASE.com will have already spent the money, time, and resources to develop a sophisticated behind-the-scenes approach to a cataloging and database management. A single company to do this independently would be extremely expensive and time consuming. Our pooling of resources will benefit the customer in the end to get them faster to market.

Another value proposition is that because of our excellent knowledge, our database will be more up-to-date than anyone else in the industry. RAASE.com’ customers will be more up to date than anyone else in the industry because we will constantly update the database whenever new applications are released.

Competitive Edge

We start with a critical competitive edge: Our positioning on this fact is very hard to match, but only if we maintain this focus in our strategy, sales and marketing, education, and industry relationships. It is important to note that hiring more generalized Internet consultants would tend to dilute the expertise that RAASE.com brings to the table.

Another competitive edge that will distinguish RAASE.com from the competition is that not only do we provide e-commerce publishing services, but we are also heavily investing in database capital to ensure that our site runs at the greatest speed with the latest technologies. It will be updated every month for new applications and prices automatically because all e-commerce applications at RAASE.com will run on the same database behind the scenes.

Marketing Strategy

Part of our marketing strategy will be to offer our e-commerce service for free to smaller companies to prove to the industry what we can do. This customer must be chosen carefully, however, because we would not want to get into a 6-month implementation. It needs to be someone relatively local so that we may work with them more closely to iron out any bugs that may be in the system.

Part of this marketing technique will require us to have a website at http://www.raase.com that shows our capabilities and what we are all about. We feel confident that when word travels about our new service, prospects will jump on our website to at least check us out.

When we are going through this implementation process, we would like to have some press coverage as well. Aftermarket Business would more than likely want to carry the story, especially to address how the automotive aftermarket is responding to the automobile industry's massive changes. Aftermarket Business happens to be the largest publication of its kind and would be a great avenue to make our name heard, especially in light of a headline.

RAASE.com will have detailed brochures for distributors consequently written generically enough to be used for other applications as well. It will focus more towards doing business online, whether business-to-business or business-to-consumer and what they may be missing out on in the future.

We will also run a couple of ads throughout the year in trade magazines. We may even look into working out an interview about how critical it is to be online in order to be a major automotive supplier.

Another marketing strategy that RAASE.com will utilize is to go directly to the automotive manufacturers out of the country and form a strategic alliance to gain some business through them. If we were able to establish an excellent rapport and reputation with one of international automotive manufactures, it would make all the difference in pursuing new customers. It will be very critical for us to get the first customer under our belt to show that we are capable.

We will also hold two free seminars per year to educate companies about what RAASE.com can do for them. We believe that showing people our capabilities face-to-face tends to be more effective.

Positioning Statement

For distributors of auto parts or garages holders who intend to stay competitive by automating the selling transaction, RAASE.com offers very specialized, industry specific expertise. Unlike the general Internet consultants, RAASE.com can provide a superior Internet commerce.

Promotion Strategy

Our primary strategy will be the high-quality brochure sent to strategic individuals as mentioned previously. We will also run a couple ads per year in various trade magazines. Lastly, we will offer two free seminars once a year for industry professionals to learn more about what the Internet can do for their aftermarket company. This demonstration should generate some major activity. Needless to say, there is no better sales tool than actual demonstrations. Our main selling point will be that the system we will design will be tailored to their business strategy and will reduce operating costs considerably. Once we have some projects completed, we will show potential customers what we have done previously.

Marketing Programs

Our most important method of gaining recognition throughout the industry will be networking with key executives through current relationships. We do not believe that a major advertising campaign will bring major inquiries on our services. However, we will run some ads in trade magazines to at least get our name out in the industry. Our annual budget for magazine advertising will be no more than $7,500. We will plan to run a small ad every quarter in journals.

Sales Strategy

Our key sales strategy will be to first send out the corporate brochure to highly qualified prospects within the industry. This will be followed closely by a phone call from our top management to set up a meeting to discuss. In the first few months, Management top team will be taking the e-commerce professional to these meetings so that they can demonstrate what they can do for the customer. Once a couple of customers have been established, we can make these calls independently.

Sales Forecast

The following table and chart give a run-down on forecasted sales. We expect sales to be sluggish as RAASE.com tries to establish itself. We do expect sales to increase within a few months of startup. We are also forecasting higher increases at the beginning of each year due to budgets being established. Sales are considerably higher in years 2 and 3 due to adding one employee per year. We expect an increase in sales of 37% in year 2, and 50% in year 3. We are confident that once the word is out that there is an Internet consultant with automotive experience, our market niche will be booming.

Sales

2013

2014

2015

 

Graphic Design

4,000,000

7,500,000

8,250,000

Web Development

6,000,000

8,000,000

10,000,000

E-Commerce

8,253,000

12,650,000

30,080,000

Web Hosting - General

12,000,000

13,700,000

19,560,000

Web Hosting - E-Commerce

15,000,000

20,000,000

25,000,000

Total Sales

45,253,000

61,850,000

92,890,000

Milestones

The accompanying table lists important program milestones, with start and end dates, and budgets for each. The milestone schedule indicates our emphasis on planning for implementation.

What the table doesn't show is the commitment behind it. We will hold monthly follow-up meetings every month to discuss the variance and course corrections to ensure that everything is completed in a timely fashion.

MILESTONES

Start Date

End Date

BUDGET (RWF)

Purchase Hardware and Software

March 1, 2013

April 11, 2013

5,521,950

Set-up Office

March 4, 2013

March 22, 2013

2,000,000

Pursue Loan

July 1, 2000

September 1, 2000

-

Brochures

March 25, 2013

May 3, 2000

2,500,000

Hire Staff

October 1, 2000

December 15, 2000

150,000

Total 2013

 

10,171,950

New Hire - Web Design

January 1, 2014

February 1, 2014

150,000

New Computer Year 2

January 1, 2014

January 15, 2014

650,000

Total 2014

 

800,000

New Hire - E-Commerce

January 1, 2015

February 1, 2015

150,000

New Computer Year 3

January 1, 2015

January 15, 2015

650,000

Total 2015

 

800,000

GRAND TOTAL

11,771,950

Management analysis

The management top team, for at least the first few years will be the founder and owner of RAASE.com. As we grow, we may take on additional management expertise if the volume of business justifies it.

Organizational Structure

Everyone will report to the management top team. However, the office will be structured so that everyone has enough room to grow and hone their individual skills to enhance their business success. To do this, the web designer (typically with less experience and expertise than the e-commerce professional) will report to the e-commerce Professional. It is the management team’s intent for this to be a mentor role so that the web developer could then step up and fulfill an e-commerce role someday. As mentioned previously, education is a critical success factor for RAASE.com.

The graphic designer will technically report to the management top team, but it will be critical to foster a creative environment for this position. This artist should be making many graphic decisions on their own. This will be a fast-paced, facilitating role.

Management Top Team

RAASE.com is a sole proprietorship owned by future MCM student who has gained a vast knowledge of information systems. They will soon carry a Master degree in Communication Management with Economic and marketing knowledge. RAASE.com will initially have three employees. Additional staff support will be obtained as further success of the company allows in subsequent years.

Personnel Plan

The following table summarizes our personnel expenditures for the first three years, with compensation increasing from 12,500,000 Rwf the first year to about 32,400,000 rwf in the third. We believe this plan is a fair compromise between fairness and expedience and meets the commitment of our mission statement. The detailed monthly personnel plan for the first year follows.

Personnel

2013

2014

2015

months

10

12

12

Graphic Designer

-

6,000,000

6,000,000

Web Developer

6,500,000

7,800,000

7,800,000

E-Commerce Professional

-

-

11,400,000

Other

6,000,000

7,200,000

7,200,000

Total Payroll

12,500,000

21,000,000

32,400,000

Total Headcount

3

4

5

Total Payroll Expenditure

12,500,000

21,000,000

32,400,000

FINANCIAL ANALYSIS

We are predicting that the business will grow at a relatively rapid rate. Fortunately, financing that growth will not be much of an issue due to a low number of fixed costs. As long as collection goes well, the payroll expenditure will be covered with profits to spare. Part of our strategic plan is to offset the major e-commerce projects with smaller web design projects to keep our cash flow in good standing. Keep in mind that we are assuming start-up capital of 12,000,000 rwf. This will be the only long-term loan required for RAASE.com, at least for the first 3 years.

Important Assumptions

We recognize that assuming the life for future is critical. We will make it a corporate goal to keep company stable. We are assuming that we will do a fairly good job at collecting Interest rates, tax rates, and personnel compensation are based on conservative assumptions.

The office expenses for supplies and internet connection are expected to 2000 rwf and 4000 rwf respectively. These expenses will increase 25% 20% respectively for the next years

office expenses

2013

2014

2015

supplies

per month

20000

per year

240000

300000

375000

internet connection

per month

40000

 

 

per years

480000

576000

691200

total

720,000

876,000

1,066,200

Vehicle expenses

vehicle expenses

rwf

1 km will cost

 

300

 

200 km for 1 week will cost

200

60,000

 

48 weeks in a year will cost

48

2,880,000

travel expenses

2 travel

 50,000 per night

 20 nights

occasional entertainment

 

1,000,000

Organization due

 

internet web assoc.

per year

50

20,000.00

html writers

100

40,000.00

150

60,000.00

Advertise expenses

year1

year 2

year 3

2 ads

30000 per month

3600

360,000

 

 

Increase 10%every years

32500 per moth

3900

390,000

 

10%

7500

750,000

825,000

907,500

Depreciation

direct amortized in 5 years

Year 1:

Year 2:

Year 3:

3 HP Pavilion g6x series

4 HP Pavilion g6x series

5 HP Pavilion g6x series

1 MacBook pro,

1 MacBook pro,

1 MacBook pro,

1 Color LaserJet Printer,

1 Color LaserJet Printer,

1 Color LaserJet Printer,

1 Storage

1 Storage

1 Storage

depreciation

According to the milestone and budget

Unit price

2013

2014

2015

Procom

980,000

196,000

 196,000

 196,000

HP Pavilion g6x series

650,000

390,000

390,000+130,000

390,000+130,000

MacBook pro,

800,000

160,000

160,000

160,000

QMS Magicolor 2 Laser Printer

400,000

80,000

80,000

80,000

 Total depreciation

2,830,000

826,000

956,000

1,086,000

accumulated

 

826,000

1,782,000

2,868,000

tax incurred

 

28%

18%

2013

2014

2015

interest expanses

12,000,000

10%

1,200,000

1,080,000

972,000

rent

700000

 

2,100,000

8,400,000

8,400,000

8,400,000

software

Macromedia Dreamweaver UltraDev

150,650.00

ColdFusion 4.5

280,500.00

Adobe Publishing Collection

100,000.00

Acid Pro 2.0

50,000.00

total

 

581,150.00

expensed equipment

Epson 800 Scanner

80,000.00

Toshiba 2.14 megapixel Digital Camera

100,800.00

HP Photo smart P100

200,000.00

HP LaserJet 2100

200,000.00

4 NIC Cards

150,000.00

1 HUB

80,000.00

total

 

810,800.00

long term assets

1 Procom

980,000.00

3 HP Pavilion g6x series

1,950,000.00

1 MacBook pro

800,000.00

QMS Magicolor 2 Laser Printer

400,000.00

 

4,130,000.00

startup expenses

filing

40,000.00

recruitment

250,000.00

290,000.00

phone expenses

200,000 per year

2013

2014

2015

10%

200,000

220,000

242,000

is based on 200,000 per year and it increase 10% each year

2013

2014

2015

account payable

8%

7.50%

8.20%

45,253,000

61,850,000

92,890,000

3,620,240

4,638,750

7,616,980

account receivable

50%

50%

50%

1,810,120

2,319,375

3,808,490

company insurance

2013

2014

2015

500000

500,000

560,000

627,200

12%

it increase 12% each year

Projected Income statement (loss and profit)

INCOME STATEMENT

2013

2014

2015

Sales

45,253,000

61,850,000

92,890,000

Direct Cost of Sales

-

-

 

Production Payroll

-

-

 

Other

-

-

 

Total Cost of Sales

-

-

-

Gross Margin

45,253,000

61,850,000

92,890,000

Gross Margin %

100%

100%

100%

Operating expenses:

 

 

 

Server Lease

10,000,000

12,000,000

15,000,000

Database Licenses

2,000,000

2,000,000

2,000,000

Advertising/Promotion

750,000

825,000

907,500

Travel & transportation

1,000,000

1,000,000

1,000,000

Payroll Expense

12,500,000

21,000,000

32,400,000

Depreciation

826,000

956,000

1,086,000

Payroll Tax Expense (30%)

3,750,000

6,300,000

9,720,000

Utilities

-

-

-

Insurance

500,000

560,000

627,200

Rent

8,400,000

8,400,000

8,400,000

Vehicle Expense

2,880,000

2,880,000

2,880,000

Office Expense

720,000

876,000

1,066,200

Phone Expense

200,000

220,000

242,000

Organization Dues

60,000

60,000

60,000

Total Operating Expenses

43,586,000

57,077,000

75,388,900

Profit before Interest and Taxes (PBIT)

1,667,000

4,773,000

17,501,100

Interest Expense Long-term

1,200,000

1,080,000

972,000

 

467,000

3,693,000

16,529,100

Taxes Incurred (18%)

84,060

664,740

2,975,238.00

Net Profit

382,940

3,028,260

13,553,862

Net Profit/Sales

0.85%

4.90%

14.59%

Projected Cash Flow

 

2,013

2,014

2,015

Net Profit

382,940

3,028,260

13,553,862

Plus:

 

Depreciation

826,000

956,000

1,086,000

Change in Accounts Payable

3,620,240

4,638,750

7,616,980

Current Borrowing (repayment)

-

-

-

Increase (decrease) Other Liabilities

-

-

-

Long-term Borrowing (repayment)

-

-

-

Capital Input

-

-

-

Subtotal

4,829,180

8,623,010

22,256,842

Less:

 

Change in Accounts Receivable

1,810,120

2,319,375

3,808,490

Change in Inventory

-

-

-

Change in Other Short-term Assets

-

-

-

Capital Expenditure

-

2,500,000

2,500,000

Dividends

-

-

-

Subtotal

1,810,120

4,819,375

6,308,490

Net Cash Flow

3,019,060

3,803,635

15,948,352

Cash Balance

3,019,060

6,822,695

22,771,047

Projected Balance Sheet

BALANCE SHEET

 

 

 

 

2013

2014

2015

Assets

Short-term Assets

 

Cash flow

3,019,060

6,822,695

13,553,862

Accounts Receivable

1,810,120

4,129,495

7,937,985

Inventory

-

-

-

Other Short-term Assets

-

-

-

Total Short-term Assets

4,829,180

10,952,190

21,491,847

Long-term Assets

 

 

Capital Assets

8,029,650

10,529,650

13,029,650

Accumulated Depreciation

826,000

1,782,000

2,868,000

Total Long-term Assets

7,203,650

8,747,650

10,161,650

Total Assets

12,032,830

19,699,840

31,653,497

Liabilities and Capital

 

Accounts Payable

3,620,240

8,258,990

15,875,970

Short-term Notes

-

-

-

Other Short-term Liabilities

-

-

-

Subtotal Short-term Liabilities

3,620,240

8,258,990

15,875,970

Long-term Liabilities

 

 

 

Total Liabilities

3,620,240

8,258,990

15,875,970

 

Paid in Capital

10,000,000

10,000,000

10,000,000

Retained Earnings

(13,970,350)

(13,587,410)

(9,894,410)

Earnings (net profit)

382,940

3,028,260

13,553,862

Total Capital

(3,587,410)

(559,150)

13,659,452

 

Total Liabilities and Capital

32,830

7,699,840

29,535,422

Net Worth

(3,587,410)

(559,150)

13,659,452

Shareholder’ Equity calculation

Shareholders’ Equity = Total Asset – Total Liabilities

Shareholders’ Equity

2013

2013

2014

15,620,240

20,258,990

17,994,045

Analysis and Conclusion

Regarding this financial analysis, we can precisely say how this implementation is profitable by considering the Ration on Assets (Return on Assets) and it strongest (42.82% at the third years). This represented an extremely profitable company.

The other reasons which show up the high growth of company is the net Profit Margin (Net Profit/Sales) when the net profit shows a steady increase from 0.85% % to 14.59% % in 2015, the firm is earning 32 rwf on each 100 rwf it invest.

So briefly this initiative taken by Sar Motor and Akagera for the starting shows that in only three years they will earn a veritable finance status. This is explained by the Net Worth that we have now (-3,587,410 rwf) which is negative but because of good finance health, there is a consistent increase (13,659,452 rwf) at the third year. So this is a key measure of how the company is worth.