A business plan of FRUXTECH Company - 19974

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                        A business plan of FRUXTECH Company (IT INDUSTRY)

 Executive Summary

By focusing on its strengths, its key customers, and the underlying values they need, FRUXTECH company  will increase sales to more than $10 million in three years, while also improving the gross margin on sales and cash management and working capital.

This business plan leads the way. It renews our vision and strategic focus: adding value to our target market segments, the small business and high-end home office users in our local market. It also provides the step-by-step plan for improving our sales, gross margin and profitability.

This plan includes this summary, and chapters on the company, products and services, market focus, action plans and forecasts, management team, and financial plan.

- Objectives

1. Sales increasing to more than $10 million by the third year.

2. Bring gross margin back up to above 25%, and maintain that level.

3. Sell $2 million of service, support, and training by 1998.

4. Improve inventory turnover to 6 turns next year, 7 in 1996, and 8 in 1997.



FRUXTECH company is built on the assumption that the management of information technology for business is like legal advice, accounting, graphic arts and other bodies of knowledge, in that it is not inherently a do-it-yourself prospect. Smart business people who aren\'t computer hobbyists need to find quality vendors of reliable hardware, software, service and support. They need to use these quality vendors as they use their other professional service suppliers as trusted allies.

FRUXTECH company is such a vendor. It serves its clients as a trusted ally, providing them with the loyalty of a business partner and the economics of an outside vendor. We make sure that our clients have what they need to run their businesses as well as possible, with maximum efficiency and reliability.

Many of our information applications are mission critical, so we give our clients the assurance that we will be there when they need us. 




Company overview:

- Company Summary

FRUXTECH companyis a 10-year-old computer reseller with sales of $7 million per year, declining margins, and market pressure. It has a good reputation, excellent people and a steady position in the local market but has been having trouble maintaining healthy financials.

- Company Ownership

FRUXTECH company  is a privately-held C corporation owned in majority by its founder and president, Ralph Jones. There are six part owners, including four investors and two past employees. The largest of these (in percent of ownership) are Frank Dudley, our attorney, and Paul Karots, our public relations consultant. Neither owns more than 15%, but both are active participants in management decisions.

-Company Locations and Facilities:

We have one location-- a 7,000 square foot store in a suburban shopping center located conveniently close to the downtown area. It includes a training area, service department, offices and showroom area.

Products and services :

FRUXTECH company  sells personal computer technology for small business including personal computer hardware, peripherals, networks, software, support, service and training.

Ultimately, we are really selling information technology. We sell reliability, and confidence. We sell the assurance to small business people to know that their business will not suffer an information technology disaster.

FRUXTECH company  serves its clients as a trusted ally, providing them with the loyalty of a business partner and the economics of an outside vendor. We make sure that our clients have what they need to run their business as well as possible, with maximum efficiency and reliability. Since many of our information applications are mission critical, we give our clients the confidence that we will be there when they need us.

-Product and Service Description

In personal computers, we support three main lines:

The Super Home is our smallest and least expensive, initially positioned by its manufacturer as a home computer. We use it mainly as a cheap workstation for small business installations. Its specifications include ....

The Power User is our main up-scale line. It is our most important system for high-end home and small business main workstations, because of .... Its key strengths are .... Its specifications include ....

The Business Special is an intermediate system, used to fill the gap in the positioning. Its specifications include ...

In peripherals, accessories and other hardware, we carry a complete line of necessary items from cables to forms to mousepads ...

In service and support, we offer a range of walk-in or depot service, maintenance contracts and on-site guarantees. We have not had much success selling service contracts.

Market analysis & plan:

-Market Analysis Summary

FRUXTECH companyfocuses on local markets, small business and home office, with special focus on the high-end home office and the 5-20 unit small business office.

- Market Segmentation

The segmentation allows some room for estimates and nonspecific definitions. We focus on a small-medium level of small business, and it is hard to find information to make an exact classification. Our target companies are large enough to need the high-quality information technology management we offer, but too small to have a separate computer management staff such as an MIS department. We say that our target market has 10-50 employees, and needs 5-20 workstations tied together in a local area network; the definition is flexible.

Defining the high-end home office is even more difficult. We generally know the characteristics of our target market but we can\'t find easy classifications that fit into available demographics. The high-end home office business is a business, not a hobby. It generates enough money to merit the owner\'s paying real attention to the quality of information technology management, meaning that there is both budget and concerns that warrant working with our level of quality service and support. We can assume that we aren\'t talking about home offices used only part-time by people who work elsewhere during the day, and that our target market home office wants to have powerful technology and a lot of links between computing, telecommunications and video.

-Industry Analysis

We are part of the computer reselling business, which includes several kinds of businesses:

1. Computer dealers: storefront computer resellers, usually less than 5,000 square feet, often focused on a few main brands of hardware, usually offering only a minimum of software, and variable amounts of service and support. These are usually old-fashioned (1980s-style) computer stores and they usually offer relatively few reasons for buyers to shop with them. Their service and support is not usually very good and their prices are usually higher than the larger stores.

2. Chain stores and computer superstores: these include major chains such as CompUSA, Computer City, Future Shop, etc. They are almost always more than 10,000 square feet of space, usually offer decent walk-in service and are often warehouse-like locations where people go to find products in boxes with very aggressive pricing and little support.

3. Mail order: the market is served increasingly by mail order businesses that offer aggressive pricing of boxed product. For the purely price-driven buyer who buys boxes and expects no service, these are very good options.

4. Others: there are many other channels through which people buy their computers, usually variations of the main three types above.


            The only way we can hope to differentiate well is to define the vision of the company to be an information technology ally to our clients. We will not be able to compete in any effective way with the chains using boxes or products as appliances. We need to offer a real alliance.

The benefits we sell include many intangibles: confidence, reliability, knowing that somebody will be there to answer questions and help at the important times.

These are complex products, products that require serious knowledge and experience to use, and our competitors sell only the products themselves.

Unfortunately, we cannot sell the products at a higher price just because we offer services; the market has shown that it will not support that concept. We have to also sell the service and charge for it separately.


At present we believe we have a good team for covering the main points of the business plan. The addition of Sabrina Benson was important as a way to cement our fundamental re-positioning and re-engineering.

At present, we are weakest in the area of technical capabilities to manage the database marketing programs and upgraded service and support, particularly with cross-platform networks. We also need to find a training manager.

The most important element in the financial plan is the critical need for improving several of the key factors that impact cash flow:

  1. We must at any cost stop the slide in inventory turnover and develop better inventory management to bring the turnover back up to 8 turns by the third year. This should also be a function of the shift in focus towards service revenues to add to the hardware revenues.
  2. We must also bring the gross margin back up to 25%. This too is related to improving the mix between hardware and service revenues because the service revenues offer much better margins.
  3. We plan to borrow another $150,000 long-term this year. The amount seems in line with the balance sheet capabilities.










Financial Statement:

All of these concerns are part of the general trend affecting computer resellers. The margin squeeze is happening throughout the computer industry worldwide.

Past Performance












Gross % (calculated)




Operating Expenses




Collection period (days)




Inventory turnover




Balance Sheet: 1996

Short-term Assets

Cash $55,432

Accounts receivable $395,107

Inventory $651,012

Other Short-term Assets $25,000

Total Short-term Assets $1,126,551

Long-term Assets

Capital Assets $350,000

Accumulated Depreciation $50,000

Total Long-term Assets $300,000

Total Assets $1,426,551

Debt and Equity

Accounts Payable $223,897

Short-term Notes $90,000

Other ST Liabilities $15,000

Subtotal Short-term Liabilities $328,897

Long-term Liabilities $284,862

Total Liabilities $613,759

Paid in Capital $500,000

Retained Earnings $238,140

Earnings $437,411 $366,761 $74,652

Total Equity $812,792

Total Debt and Equity $1,426,551

Other Inputs: 1996

Payment days 30

Sales on credit $3,445,688

Receivables turnover 8.72


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