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The Business Model

MGT 305 Small Business Management

Emma Stewart

on 13 January 2013

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Transcript of The Business Model

The Business Model: Shotel Background of the Idea Sales and Marketing Strategies Method of Valuation Legal Structure The purpose of Shotel is to act as a central hotel information directory
Service is provided through website subscriptions, tolled phone calls, and a phone application
Holds a competitive advantage over rivals, holding all the information required on hotels in Sydney, answering all customers needs
Creates value through its convenience and time saving abilities Shotel will operate as a small proprietary limited company Legal Structure cont.. Organisational Structure Conclusion Reference List Shotel will use the 'earnings-based method' Shotel will have a flat structure (Samson & Daft, 2009, p.374)
This is beneficial to the business, as it helps define authority, responsibility, and how the company functions
Also helps improve productivity and communications, as well as identify job roles (NSW Government, n.d.) Risks, such as investing money into a new business venture (Schaper, et. al., 2011, p.40) Bean Counter. 2003-2004. So, you want to lean Bookkeeping!, Available:http://www.dwmbeancounter.com/tutorial/Tutorial.html (accessed 5 December 2012).
MAUS Business Systems. 2007. Proprietary Limited Company
2007-2012 ninemsn Pty Ltd
Available: http://finance.ninemsn.com.au/smallbusiness/planning/8123993/proprietary-limited-company (accessed 7 December 2012)

NSW Government. n.d. Organisational Structure
NSW Government Trade & Investment
Available: http://toolkit.smallbiz.nsw.gov.au/part/3/14/68 (accessed 7 December 2012)

Samson, D., Daft, R.L. 2009. Management, 3rd Asia Pacific ed., Cengage Learning Australia Pty Limited, South Melbourne, Victoria

Schaper, M., Volery, T., Weber, P., Lewis, K. 2011. Entrepreneurship and Small Business, 3rd Asia-Pacific ed., John Wiley and Sons Australia Ltd, Milton, QLD

THINK: Education. 2012. MGT 305 Study Guide: Small Business Management
Available: http://www.learning.williamblue.edu.au (accessed 6 November 2012)

WiseGeek n.d. What is a Call Centre Job? [Image]
2003-2012 Conjecture Corporation
Available: http://www.wisegeek.com/what-is-a-call-center-job.htm (accessed 8 December 2012) Using the chosen business model, Shotel will be able to operate as a stable and successful small business
The business’ overall aim will be to capitalise on having a high volume of sales through its number of distribution channels, allowing it to be valued highly in the marketplace Emma Stewart #00044043T
Penelope Abnett #00047654T
Holly Frendo #00046992T
Lecturer: Brent Reihana Based on the idea that a business’s true value is focused on the ability to produce high percentages of revenue in the future Shotel is designed to attract high sales through: - phone calls
- website subscriptions
- advertising
- phone application Shotel’s objective:
Maintain and further strengthen its customer base and sales each year Why Other Methods Of Valuation Are Not Used? Asset-based valuation:
- Tangible and Intangible assets

- Shotel's intangible assets = customer and information databases

- Too difficult, small businesses owners pay attention to solid predictable income streams for future success Market-based valuation:
- Focused on previous sales of similar businesses that were sold in the past

- Does not take into account the potential future earnings or the value of the business’s assets

- Difficult to obtain accurate information on market prices (Schaper et al., 2011, p. 113-114). Operations of the Small Business Accrual Accounting:
- Recording income in a time frame earned and records expenses and capital expenditures (Bean Counter, 2003-2004).

- Accurate picture of the results of Shotel’s operations, profit and loss, revenue and expenses paid or unpaid

- Track receivables and payables

- Easier to organise, prioritise and manage cash flow

- Allows transactions to be recorded once they are used or incurred (e.g. Shotel’s sales from subscriptions and the phone application) Indirect & Direct Costs Indirect Costs:
- Multiple activities or services that benefit more than one project. They are the ongoing costs (overheads)

- Administration staff contracted salaries (e.g. IT specialists), insurances and licenses, loans, taxes, depreciation, rent, advertising, utilities, travel Direct Costs:
- Benefits for a specific item (e.g. service / product)
- Based on directly involved efforts or expenses

- Computers, headset pieces, furniture, fittings, and equipment for the office, employee wages, telephones, database and email programs Goals and Objectives Long Term Short Term Building a solid customer base
Generate substantial revenue, and begin to make a profit
Attract a good reputation for the business' service qualities and the insights on hotels provided
Keep an accurate and updated database, ensuring this helps drive the business to success Expand into other major tourist destinations and cities worldwide
Retain customer loyalty, and attract a large market portion
Remain a market leader among competitors Shareholders will consist of the business founder, and investors who will also be employed by the company (MAUS Business Systems, 2007)
Holds limited liability, where shareholders bear less risk (Schaper, et. al., 2011, p.200)
Shotel will be a separate legal entity, where taxes a paid by the company (Samson & Daft, 2009, p.236)
The business will continue to exist, even if something was to happen to any of its shareholders (Schaper, et. al., 2011, p.200) Source: (WiseGeek, n.d.) Target Markets Primary Target Market:
Male and Female individuals aged between 18-65
Live in or wish to travel to Australia
Heavy time constraints and are technologically savvy
Want as much information as possible at their disposal when making choices Secondary Target Market:
Small and large businesses Australia-wide
Willing to purchase membership packages for the benefits that it will bring them Distribution Channels How is the service obtained? Sales Projections Obtained from hotels who will possess information Shotel will obtain information from phone calls and emails This information will be stored in databases Transactions: phone calls & phone application

Subscriptions: website & phone application

Advertising: hotels will advertise on Shotel's website by creating banners as well as side panel advertisements How is the service delivered? Financial Projections Allows us business owners to measure the health of Shotel
To make better decisions for the business & it's future
Shotel has projected forecast for the business's:
- Cash Flow
- Sales Mix
- Profit & Loss Statement
- Owner's Personal Expenses, Assets and Liabilities Financial Projections Expenses generated from:
- Rent
- Equipment
- Insurances & licenses
- Advertising
- Accounting fees
- Staff wages
- Utilities
- Travel
- Telephone *Cash Flow Forecast* Basic Assumptions & Information Based on current market research:
June 2012 - 7.9 million domestic overnight visitors in Sydney's city
20% represents Shotel's target market
Approx. 101, 910 individuals would utilise this service Shotel Annual Fee $200 10 log ins Advertise Example: Business Memberships Financing The Business Shotel Co-Founder (51%) Shareholder (1)
(24.5%) Shareholder (2)
(24.5%) "Proof of Concept" Government-backed scheme program
($250,000) Distribution Of Profits Profits in the 1st Year are kept in the business
Future: divided into 3 parts
- stakeholders
- business
- bank
Remaining capital go towards maintenance, equipment, updating technology, contingency plans
Future high profits = the possibility to expand Shotel to other industries (e.g. car rentals or airlines) Analysis Forecast Net Profit Margin = 1.3%
Mostly low in the first year of trade
Expected margins to increase in the next 2-3 years
Opportunity to use other ratios to analyse business performance Projecting The Business Forward Reduce expenses:
Forward purchasing agreements with businesses (e.g. Hotels - Shangri-La, Hilton, Intercontinental)
Agreement to:
- Use office space
- Equipment
- Free advertising for 6 months
- Co-branding
- Some information-data sharing Outsourcing employees:
Use independent networking companies
(e.g. One Shift)
Reduces Shotel's liabilities and employees
are contracted Grow Shotel's IP:
Use IP towards other industries
(e.g. car rentals, airlines, travel agencies/companies)
State wide, interstate, internationally Income generated from:
- Business memberships
- Individual memberships
- Advertising on website
- Smart phone application
- Incoming calls
- Subscriptions Leasing:
Office space
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