Safiya Karim Senior Thesis 2024

Fostering Success for Minority-Owned Businesses

Safiya Karim Senior Thesis | 2024

Fostering Success for Minority-Owned Businesses Safiya Karim

Introduction This summer, I took an intensive 3-week course at University of Maryland called the Terp Young Scholars Program “Special Topics in Business and Management; Enterprise, Leadership and Markets” - at the Robert H. Smith School of Business. In this class, I was introduced to important terms and concepts related to finance, marketing, and entrepreneurship while also being exposed to a life of philosophy rooted in self-reliance and self-discovery.

I learned how to use different frameworks and tools to help guide choices in the future while learning the value of business in society as I develop enterprise and leadership skills that enable personal happiness and upward mobility as I pursue my business education and career. We explored questions such as “What is my personal leadership strategy?” and “What problems in the world do I want to solve?”.

This class was created by Rajshree Agarwal, the Rudolph Lamone Chair of Strategy and Entrepreneurship and Director of the Ed Snider Center for Enterprise and Markets at the University of Maryland. Professor Agarwal came up with the “CEO of My Enterprise (ME) Inc.”, which is what the individual project of this class focused on.

Along with individual work to create a 5-year plan reflecting our personal goals and aspirations, the latter half of the program focused on a group project. I worked with four other students to pitch a new product that correlated with the elements of entrepreneurship learned from the class. This senior thesis is an extension of this group project, with a stronger financial plan than what my group and I presented in our pitch.

The first homework assignment in this class was a bit of a shock to me. I was told to watch the movie version of The Martian, starring Matt Damon as Mark Watney. The film is about an

astronaut, Mark Watney, who struggles to survive on Mars after being left behind while NASA tries to rescue him and return him to Earth. Throughout the CEO of ME exercises, I was simultaneously introduced to ways in which Mark Watney also followed the CEO of ME guidelines in order to reach his goal - or purpose - of surviving the harsh environment of Mars and managing to return back to Earth.

CEO of My Enterprise (ME) According to Professor Agarwal, the first step to “Enterprising You” is to create a framework that follows five steps. The first four steps involve answering four critical questions: “What is my purpose?”, “What is success for me?”, “What is my value proposition?”, and “With whom should I trade?”. Finding the answers to these questions requires one to evaluate current and future actions, as well as determine how these actions accomplish your mission, whatever it may be. The last of the five steps is to create a Traders Sudoku, determining the relationship and responsibilities of you and your trading partners. The goal of these steps is to “help you achieve success, create your unique value proposition, and develop win-win relationships”. These steps will help you more clearly and efficiently design how you plan to reach your goals.

What is my purpose?

To answer this first question, one has to think about what issues or problems they wish to solve. These issues typically are related but not limited to one’s personal worldview and experiences. First, you state your purpose. Then, you create a list of as many actions you can think of that you must take in order to accomplish this purpose. In the movie The Martian, For Mark Watney, his purpose is to return to Earth. The steps required to fulfill his purpose are all related to food, communication, and transportation. For food, Mark must assure that he has enough rationed food supply, and he has to figure out how to create water and fertilizer to grow more potatoes for sustenance. For communication, Mark needs to figure out how to communicate with Earth - which he does by locating and reprogramming the old Pathfinder probe, NASA need to figure out that Mark is alive which is a result of Mark needing to figure out how to send messages to NASA, and he needs to get his old Mars team, the JPL Pathfinder team, online to assure them that he is alive. In terms of transportation, Mark must heat and power a rover to take him across Mars and retrieve the Pathfinder communication device. He also must find a way to travel to a crater where, in four years, the Ares IV mission spacecraft will land, and he will have an opportunity of being saved. When this plan is abandoned, Mark must compile a plan to travel to the Hermes, which he must use, with Earth’s gravity, to "slingshot" back to Mars two years earlier than the Ares IV. For my purpose, I stated that I wanted to eliminate the issue that many people in Belize face of not being able to pay for healthcare by working as a financial advisor for all nonprofit organizations that are already working to fix this issue. I would create a consulting firm that specifically focuses on working with NGOs, or nonprofit organizations. Some activities that I would

need to complete to fulfill this mission include graduating college, becoming a successful and credible financial advisor, traveling to Belize for research, connect with people who can help me create a financial consulting firm, hiring people to work for my firm in Belize and in the US, and building headquarters with all the necessary materials needed.

What is success for me?

Once all conceivable actions are listed, the next step is figuring out what success looks like for you. In other words, which of the previously stated actions must you complete to fulfill your interpretation of success? First, you state what success looks like to you. Going back to the movie as an example, for Mark Watney, success is to survive on Mars long enough to solve the issues of food, communication, and transportation, so that he can return to Earth. Then, you must categorize your actions into four categories: love but not good at (hobbies), good at but don’t love (chores) love and good at (calling), and don’t love and not good at (misery). This categorization is called a “success matrix”. For example, in his success matrix, Mark would put “figuring out how to send messages through a rover” under “hobbies” since it is exciting for him but he is not good at it, “figuring out how to secure a food supply” would be under “calling” since he is a professional botanist, “figuring out that he is alive” would be be under “misery” since that is a task for NASA to do that he cannot contribute to, and “solving fertilization and water supply issues” would be under “chores” because it is something that he knows how to do, but is not easy to do.

Once you do this, you can see which actions you should not take, to assure that they are done correctly and thoroughly. Any actions that you have put in the “misery” and “chores” categories should be done by trading partners. The “calling” category can be

done by you, as well as the “hobbies” category - after some learning and education to assure that you become good at such actions.

For my personal success statement, I wrote that “in five years, success to me looks like graduating college and landing a job as a financial consultant where I continue to learn and practice for the future when I am working with NGOs to help people in Belize pay for healthcare with a financial consulting firm that I own or co-own”. In my success matrix, I put “hiring accountants and auditors to prepare and examine financial records, identify potential areas of opportunity and risk, and provide solutions for businesses and individuals” under “hobbies” since I think it will be fun to hire people, but I am unsure of how to choose employees properly and strategically. I put “connecting with people who can help create a consulting firm for my purpose and become potential trading partners” under “calling” because it is a task that I am passionate about, and because I am good at connecting with people. I put “determining what benefits - like healthcare and insurance - my employees receive by working for me, and how much money each employee is to be paid” under “misery” because it is a task that I am uninterested in doing, and because I lack the knowledge of how to do it. Finally, I put “planning meeting dates and locations with interviewees that live in the town of Ladyville, Belize” under “chores” because while I am good at planning things, this is not a task that I would enjoy doing.

What is my value proposition?

The third question to think about is what your value proposition is. When reflecting on yourself in relation to others, think of aspects of your upbringing, interests, or abilities that make you different from others, and which of those things might be valuable in the business world when trying to fulfill your purpose.

The first part of your value proposition is stating your personal skills that you want to leverage. For Mark Watney, he would state that he wants to leverage his engineering and botany skills, humor, and optimism to survive long enough to find a way to get home to Earth. For my value proposition statement, I stated that “I want to leverage my experiences from traveling to the poor areas of Belize with my family and my knowledge of the financial struggles faced in Belize to create a better life and future for citizens there who are struggling to afford healthcare”. Similarly to the success exercise, the next step of your value proposition is organizing your list of actions into more categories. There are four kinds of actions in this step: value-added but not unique, unique but not value-added, not value-added and not unique, and value added and unique. The goal is to make sure that the “value-added but not unique” and “not value-added or unique” sections are empty. This better helps you understand which actions are important for you to do - or indispensable - meaning they are important in helping you “realize your purpose” and understanding which actions can and should be done by others, meaning that they are the “lackluster” actions.

For Mark, he would put an action like “modifying the Ares IV to help get into Mars orbit” under “indispensable” because it is an important task within which the Ares IV would be a valuable tool to use to help Mark survive. It is also indispensable because it is a task that can only be done by Mark, which makes it unique.

Mark would put “sending food re-supply to Mars” under “lackluster” because it is a task that can only be done by NASA. In my value proposition matrix, I put “connecting with people who can help create a consulting firm for my purpose and become potential trading partners” under “indispensable” because it needs to be done by me and is crucial in starting my business. I put tasks like “calculating and managing finances for a trip to Belize to interview the people there” under “lackluster” because it is busywork that does not necessarily need to be done by me.

With whom should I trade?

The next step in the CEO of ME framework plan is to determine your trading partners. Taking your list of lackluster actions from your value proposition matrix, determine who the most appropriate individual, group, or organization would be that you are confident can successfully complete their tasks. Each action from your list should have their own thought-out trade partner assigned to it, but it is also acceptable for trade partners to repeat for some actions. It is important to think of who might have complementary skills to yours, and who would be willing to trade with you, meaning that trading would be a “win-win” situation of some sort.

For Mark, his trade partners would include NASA, a satellite planner in Mission Control named Mindy Park, the Jet Propulsion Laboratory (JPL), the Chinese Space Agency, JPL’s astrodynamics expert Rich Purnell, and the space crew of the Hermes vessel.

Some trading partners that I may consider for myself would include a hiring manager to find employees for each of my firms’ locations, an architectural company to help design and build my firm’s buildings, procurement managers for the firm’s necessities, compensation and benefits managers for my employees, and nonprofit organizations that I plan on collaborating with.

Trader Sudoku This final step is optional, but often helpful in building a productive, long-term relationship with your trading partners. A Trader Sudoku emphasizes the importance of considering both parties' aspirations and abilities and identifying common objectives. The goal is to ensure that there is a strong alignment

between you and your trading partner’s goals, values, and skills, which will ultimately yield a win-win relationship. According to Professor Agarwal, “the model hinges on voluntary trade, which means I cannot choose your path for you. But I do maintain freedom of association and veto power in any alliance. So do you”.

While creating a Trader Sudoku is often difficult and messy, she suggests following the ABCs of voluntary trade: “Acquire information that goes beyond the actions to the underlying aspirations and abilities. Build on common interests. Create a winwin”.

First, you determine the aspirations of your partner, along with yours as well. What dreams do you share, and how do your missions overlap? The key is to identify what you are pursuing and how it follows or fits your own personal values. If Mark Watney was analyzing his relationship with NASA as a trading partner, his Trader Sudoku would state that he is pursuing the journey and challenge of getting back to Earth, and that it is critical to his longterm survival and ability to pursue the value of problem solving and his interests in learning about long-term survival in space. His partner, NASA, would have written that their aspirations include pursuing the completion of the Ares III mission safely, minimizing risk to astronauts, and also learning about long-term survival in space. This is already a good sign, since some of Mark and NASA’s goals are either the same or similar.

When practicing creating a Trader Sudoku, I focused on my partnership with nonprofit organizations that work to help developing countries. While my aspirations specifically focus on helping people in Belize afford or pay for healthcare by advising NGOs on how to manage their funds strategically, effectively, and efficiently in a way that maximizes a positive impact on those who we are helping. My partner - nonprofit organizations that work towards helping developing countries - would have the aspiration

of helping developing countries in as many ways as possible, including through financial help with healthcare costs.

Now that it can somewhat be seen that some of Mark and NASA’s aspirations are similar, the next step is to determine the common objective of the two partners. The most important and clear goal would be to get Mark Watney back to Earth safely.

However, another less important but equally valued objective between the two would be enhancing their scientific knowledge and understanding of Mars and space exploration. The common objective between me and nonprofit organizations that I trade with is to help people in Belize afford healthcare.

The next step helps to determine how you and your partner’s abilities complement each other, as well as considering what each partner brings to the table that might be of use to the other. Mark’s abilities include problem solving, botany, chemistry, physics and engineering skills, humor, positivity, and the ability to implement on Mars. NASA’s abilities include providing a great deal of manpower to support Mark with problem solving, financial resources, and the ability to offer supplies and transportation for Mark on Mars.

In my ability analysis, I stated that my abilities include - in five years - being educated in financial management, being a good advisor to NGOs, and having already started brainstorming a plan within which we would work together. NGOs’ abilities include experience helping developing countries all over the world, and as a result more knowledge on how and why people are struggling to afford healthcare in places like Belize. From this, I know that I am on the right path and it is clearer to me that there are specific skills that I am looking for in a nonprofit organization as a business partner.

Now that you know the difference between your skills and your partner’s skills, you can use these skills to determine the specific courses of action that you and your partner will

individually take to help bring you both towards your shared goal.

What am I going to do, and what are you going to do? For Mark, he will oversee getting in touch with NASA, sharing information about his status with NASA as often as possible, and following NASA’s instructions in order to reach Ares IV spacecraft and into Mars orbit. NASA is in charge of observing Mark at all times, responding when he tries to make contact, setting entire teams to dedicate time to helping Mark work through his problems while providing advice, and fundraising to pay for both a resupply mission of supplies for Mark as well as transport home. For me, an example of a task that I would be in charge of is being a free financial advisor for nonprofit organizations, while they are in charge of working hands on to provide people in Belize with the assistance they need in order to afford healthcare.

While A Trader Sudoku might seem like cumbersome at times, it can be useful in many situations When conflict arises, having a Trader Sudoku ready can help remind you of the “bigger purpose” and inspire you to keep working towards your goal, reminding and reaffirming you of the common objective that you and your partner(s) share. It is also useful in guiding you through the search process of finding new trading partners. By making a Trader Sudoku beforehand, you already know what aspirations, objectives, abilities, and actions you are looking for in a partner, along with the aspirations, objectives, and actions you should be following while developing your own abilities.

Minfinity After learning a great deal about goals, visions, and analytical strategies, the last task assigned in this class, as previously mentioned, was to work in groups to conceptualize a product that we would later pitch to a panel of judges. Most importantly, the product had to be similar to our personal projects

in the sense that it had to be significant to our personal lives. After a great deal of discussion and back and forth, my group was running out of time to think of a product, and we were falling behind. Finally, I thought of something. As someone who is interested in business, I started reflecting on how difficult it is for minorities - whether based on gender, religion, ethnic group, etc. to succeed in the business world, particularly in terms of representation. As a result, I came up with Minfinity, a free online platform that provides users with access to a diverse selection of minority-owned businesses. The goal is to create a website and directory of minority-owned businesses that can serve this need.

Maybe a member of a minority community wishes to support a fellow member of their community’s small business. Maybe people are looking for a place where they can further educate themselves on the traditions, foods, products, or entertainment of a specific minority group. Maybe a member of a minority group wants to find a place where they know they can feel safe and be themselves. Let’s say, for example, someone just moved to New York from Turkey, but they keep a strict Halal diet, meaning they only eat foods deemed permissible under Islamic law. They need to find the closest Halal restaurant in New York. With Minfinity, they can easily find a variety of options without any stress.

My group decided that it would be best to first launch the website and app in New York, to see how the product does. Along with being in one of the highest populated states in America, New York City is also the most densely populated city in the US, with a population of 7.6 million people. Along with this high population comes a plethora of diverse communities, which is perfect for testing our new product. We plan to stay in New York for Year 1, and then broaden our website to cover all of USA. When you first reach the home page, you will be provided a search bar in the center, along with a home button, an explore button, and an “about us” button where you can learn more about the website.

The website is designed to provide users with options, so when they click on the “explore” button, a drop-down menu will appear providing users with different business types that they might be interested in. This would include markets, restaurants, entertainment, festivals, appliances, and more. Once users click on a certain business type, they will be taken to a page filled with different businesses that follow the criteria of what they are looking for, starting with sponsored business results. To the left of the page, there is a filter bar where users can customize their ideal price level, range of distance from their current location, and the minority type they are looking for, including religion, race, disability, sexual orientation, and more.

To prove that our platform stands out and is desirable for unique reasons, we conducted a competitor analysis. Our website’s top three attractive attributes are its organization, it’s focus on diversity and minority representation, and its availability for any users through its free account access. The two key competitors we focused on were Google and Yelp since they offer similar services as Minfinity. Google may be free to all users, but it is not organized and does not focus on the representation of minorityowned businesses. Yelp may be more organized and have free access, but it also does not prioritize the representation of minority-owned businesses. This is what makes Minfinity stand out from its competitors. Yelp, however, is quite similar to Minfinity in how it is formatted. Yelp publishes crowd-sourced business reviews and provides reservation services. With Minfinity’s future research and data on all these smaller restaurants, along with its unique focus on minority-owned businesses, we could partner with Yelp in the future, working with them as a potential partner or even a strategic acquirer. A strategic acquirer is a company or investor that seeks to buy companies or assets, whose acquisition will add similar or compatible value to their existing portfolio. An exit via acquisition could be a lucrative

opportunity for myself and the founders, allowing us to finance future endeavors.

Keeping in mind the idea of a SWOT analysis – keeping track of you or your organization’s strengths, weaknesses, opportunities, and threats – there is one threat that we must keep in mind. Having a website that consists of a variety of minorityowned business locations brings a lot of attention to said businesses, but not always positive attention. There is a possibility that people may use our platform with negating intentions, such as using Minfinity as a tool to locate and target locations to commit hate crimes. To reduce this risk, we plan on taking multiple precautions. Firstly, users will be required to create an account before using our platform. They will be required to enter their first and last name, gender and pronouns (if any), their state of residency, and their ethnicity. Aside from being useful for customizing recommendations for our users, this will also allow us to identify users on surveillance cameras upon the event of an emergency, such as after a hate crime has been committed. In addition, users are required to sign a Terms and Conditions contract that states that “By applying for an account, you agree to the following: You are an ally to marginalized communities; you are not a member of any hate groups; you adhere to the mission of Minfinity to provide a sense of community and unity by providing all with access to a diverse selection of minority-run entertainment businesses; you will only use the information on our website with positive intent without doing or causing harm to any individuals or property. If discovered that any of these conditions have been violated, you will be subject to legal repercussions”. This contract serves as a safety net to urge users from going against the law.

There are costs that will need to be accounted for in order to launch Minfinity and keep it running. In its initial launch, Minfinity would start off with minimal staffing, limited to a website and app developer, a marketing specialist, and a business

development representative, along with a principal/CEO who sets strategic direction and makes decisions. There would also be nominal costs associated with website hosting and systems for processing payments.

Product Strategy In crafting a clear product strategy for Minfinity, the following questions need to be answered: • • •

What do we sell? (product) Who do we sell it to? (market) How do we know if we’re selling it successfully? (goals that are translated into product metrics)

These three questions can be further divided into seven main components (or dimensions) of a product strategy.

• • • • • • •

What is the target audience and the problem that the product must solve?

What is the size of the market?

Who is the competition?

What is our value proposition?

How will we strategically differentiate?

What is the acquisition strategy?

What is our Monetization and pricing strategy?

Target Audience Minfinity is aimed at the minority, Gen-Z to Gen-X consumer market. With the advent of social media and the increase of causebased activism on platforms such as TikTok among the demographic of adults and younger, minority-forward causes have

become a meaningful factor in influencing buying behaviors. We believe that there is an inherent problem to be solved here, which is the lack of a reliable and trustworthy way for this demographic to align their beliefs with their buying habits. Minfinity aims to serve this gap by providing a marketplace aimed at promoting and highlighting businesses and services that are aligned with minority causes. This is our value proposition.

Market Size In analyzing the potential market size for Minfinity, I performed a market segmentation exercise. Since our company is initially launching in New York City, I created two market segmentation trees that express demographics on the rough number of people I will be targeting through marketing – one for Year 1 when we are just in NYC, and another for after Year 1when Minfinity covers all of the USA. As seen in Figure 1 and Figure 2, I originally attempted to start my trees with Race, but I faced an issue when deciding how to include other types of minority such as sexuality, religion, and disability. This is why, when in relation to customers, market segmentation trees typically start by dividing by age – something I had forgotten. As seen in Figure 3 and Figure 4, we will be targeting people ages 20-54 in NYC and 15-54 in the US. While I was already planning to target this age range – Gen-X to Gen-Z – my segmentation tree confirmed that this would pose as successful, due to those ages taking up the majority of the population. I then further divided my target market into minority types to find that there are 3,869,733 people in NYC and 124,425,268 people in the US who I can direct my marketing towards. A segmentation tree is also helpful in reminding me that those numbers represent the portion of my target consumers whom are part of a minority group. Minfinity, however, is also for those who are not part of a minority group and just want to educate

themselves on a minority group, experience a business that is minority-owned, or just be a supporter. My second level of age demographics includes those people in its numbers, showing me that I have 4,124,196 people in NYC and 175,000,377 people in the US who might be interested in Minfinity.

Figure 1&2: Failed attempt to create Segmentation Tree for NYC & USA

Figure 3&4: Market Segmentation Tree of the New York City Population & USA Population

Competition One advantage of the Minfinity concept is that this seems to be a fairly uncrowded market. There aren’t too many competitors catering to specifically the market we are going after. This will be key to the strategic differentiation of Minfinity’s products and services - curated, verified listings that are minority owned or benefit the minority population by keeping dollars in minority communities.

There are business listing and discovery services such as Yelp and Google Maps, but these don’t specifically highlight or promote minority-owned businesses and services.

As such, an acquisition strategy would be to be acquired by Yelp, given it is already a popular business listing and discovery service.

Minfinity would bring a new focus on the minority market for them.

Monetization & Pricing Strategy We see monetization happening through one of three revenue models: Advertising, Subscription, and Affiliate.

In the advertising model, we would display sponsored results in exchange for an advertising fee from the provider. In doing so, it will be key to clearly mark the listing as “sponsored” within the website and app, in order to not lose the customers’ trust. In addition, once a user searches for what they are looking for, there will be a filter that appears to the right of the search bar providing users with different “search types”, where it will automatically say “recommended”, but can be changed by the customer to better fit what they are looking for.

In a subscription model, customers would pay a monthly or yearly subscription fee to get benefits such as no advertising, and possibly premium content on the site such as recipes, how-to guides, or

more. At launch, we will conduct a market survey to determine the subscription monthly rate.

Lastly, we will explore an affiliate model, where Minfinity acts as an affiliate for partners, sending referrals and redirecting users to partners for a fee. It’s important to note that there is a closely related business model to this, which is the commission model, but this generally requires fulfillment – or purchasing - of the product/services within the Minfinity website/app, rather than redirecting to our partners’ websites. We will not pursue this at launch due to the complexity of implementing fulfillment.

Year 1 Revenue Projection Inbound growth refers to growing the number of customers organically through things like advertising, as opposed to outbound growth which involves hiring a sales team to help acquire additional customers through strategies such as phone calls.

In analyzing the revenue projections, it will be important to understand inbound growth, which will be the primary means of customer acquisition in the first year.

Revenues

The Minfinity user base will depend on the number of visitors to the website/app, and the conversion rate (percentage of these users who pay to subscribe for an ad-free account). The concept of conversion rate is very common for a B2C (business to consumer) subscription business.

An average conversion rate for a website is between 2 percent and 5 percent. Assuming we have 5,000 users per month logging into the Minfinity website/app, and a 3% conversion rate, that would yield 150 new paid users per month during the first year.

At a subscription price of $10/month this will yield monthly recurring revenue (MRR) of $1,500/month, or an annual recurring revenue (ARR) of $18,000.

Advertising Revenue

Another source of revenue is the sponsored placement of advertisements for paying businesses at the top of the list when users search for something.

There are different ways that advertising payments are completed, but one of the more common ways is by CPM or Cost Per “Mille”.

This refers to a fee (CPM) that is paid by the advertiser to Minfinity for every 1,000 users that see their advertisement.

We expect a CPM of $10, which is typical for sponsored search results in consumer applications like Minfinity.

Given this CPM and 5,000 visitors, the Advertising revenue in Year 1 would be $50.

This gives us a total Year 1 revenue of $18050.

Cost of Goods Sold (COGS)

For an online business, the following items are considered main elements of determining selling prices: • • •

Payment processing expenses Hosting (and other tech infrastructure costs) Customer service (whether in-house or outsourced)

Payment processing costs are the fees that Minfinity would need to pay to a bank or some other financial institution in order to accept and process customer credit cards. Credit card processing fees typically cost a business 1.5% to 3.5% of each transaction's total.

Assuming a bank charges us a flat 2% of each payment for this service, we would owe $360 for the first year.

If we want to register minfinity.com as a domain/web site, so that browsers all over the world will be directed to the right place when they type in this address, we need to pay a domain registrar to “host” this site, and there is a hosting costs associated with this. An example of a hosting provider we might use is squarespace.com.

There is also a cost to run the site, including a one-time cost of developing (coding) the site and the mobile app for Minfinity. This is the tech infrastructure cost.

In Year 1, we estimate these costs to be $5,000 (app development); $2,500 (website development); and $500 (website and domain hosting plan) for a total cost of $8,000.

Customer service is important because this is where users go if they have an issue with the Minfinity service. Since we are just getting the business started in Year 1 and will not have a large user base, we do not have to take customer service into account, and would instead have the founders respond to customer queries.

Therefore, we would have zero money spent there.

This leads to a total COGS in the first year of $8,360.

Sales, General, & Administrative expenses (SG&A)

The following are additional costs associated with conducting a business which we will need to consider:

• • • •

Marketing Sales: sales commissions Other operating expenses: subscriptions, office supplies, office rent, etc.

Other expenses: legal advisory, bank fees, miscellaneous, etc.

We expect Minfinity marketing costs in Year 1 to be significant, as we are trying to get the brand out and visible among the target communities. We anticipate $5,000 of paid media ad placement (Google Ads, Facebook Ads, TikTok Ads, etc.) in Year 1.

We do not anticipate sales commissions as there will be no dedicated sales teams. Similarly travel costs and fixed costs such as office rent, supplies etc. will be minimal, but we are allocating $3,000 for computer hardware.

Most companies also require help from lawyers to set themselves up as what is called a “legal entity” to do business in their state.

We expect legal costs for Minfinity would be $1,500 for incorporation and formation of a legal entity in New York state for Year 1.

In sum, our SG&A costs in Year 1 come out to $9,500.

Staff

We anticipate minimal staff in Year 1, in order to keep salaries low. As CEO and founder, I would not draw a salary for myself.

Minfinity would not hire full time marketers or technical staff in Year 1 either, leading to a staff cost of $0.

Full year projection Below is an overall Revenue projection for 2024 as a waterfall chart.

Year 2 Revenue Projection Churn Rate

In a subscription business, where users are paying a monthly fee to subscribe to a service, Churn is defined as the percentage of people who do not renew their subscription. A typical churn rate for a software as a service (SaaS) company like Minfinity is 5-7%.

However, we are planning for a lower 2% churn rate, given our focused market.

With the existing user base of from Year 1 of 150 users/month and an average 2% churn monthly, we will have 1,764 users who continue with Minfinity from Year 1 to Year 2.

150 • 12 = 1,800 1,800 (1 – 0.02) = 1,764

We anticipate increased website/app traffic of 10,000 visitors/month and a slightly higher 3.5% conversion rate in Year 2 due to more targeted market segmentation; This would yield 350 new users/month during the second year.

This equates to a total of 497 paying subscribers per month in Year 2.

150 subs + (350 new subs – 3 lost subs) = 497 subs

At a price of $10/month this will yield monthly recurring revenue (MRR) of $4970/month, or a net annual recurring revenue (ARR) of $59,640.

497 subs • $10 • 12 months = $59,640

Affiliate Marketing Revenue

Year 2 will be the launch of the Affiliate program for Minfinity. In assessing the revenues from affiliate marketing, the following factors come into play: Click Through Rate: This is a measure of the percentage of visitors to the website/app who click on the sponsored affiliate product link. While the median CTR across the SaaS industry is 3.724.28%, we anticipate 0.5% CTR for Year 2, which is typical for new B2C services.

Next, we need to consider the conversion of the click to an actual purchase. Here the percentage is typically even lower, so we anticipate 0.1% conversion to purchase.

We must next consider average purchase price. While Minfinity will provide a variety of products and services, for our target market, we expect the vast majority of products/services to be in the $30-$100 range, estimating a median of $55 per purchase.

Lastly, we need to consider average affiliate commission percentages for major product categories. In general, the average affiliate marketing commission rate lies between 5 and 30%. While this varies greatly, our forecast assumes to start with an average 5% commission.

With this information we can calculate total revenues from the affiliate program.

Subscription revenues: $59,640 from 5,964 subscription users.

Affiliate revenues: With 10,000 visitors and a 0.5% CTR we expect 50 clicks per month, or 600 clicks annually. At a 0.1% purchase rate this means 0.6 purchases. At an average cost of $55 per purchase this is an annual generated revenue of $33 for our partner. With the 5% commission rate, that would yield $1.65 in Affiliate marketing revenues in Year 1, virtually zero.

Advertising Revenue

With 10,000 visitors and a CPM of $10, the Advertising revenue in Year 2 would be $100. This brings total Year 2 revenues are forecast to be $59,740 Cost of Goods Sold (COGS)

In year 2 the only COGS costs would be $500 for website/domain hosting, and a 2% payment processing fee, or $1194. As business grows, in Year 2 we would outsource customer service, at an average cost of 1% of revenue, or $595. This leads to a total COGS in year 2 of $2,289.

Sales, General & Administrative expenses (SG&A)

We expect Minfinity marketing costs in Year 2 to be lower than year 1, as the brand awareness increases, and we can reduce spend on advertising on ad placement. We anticipate a cost of $3500 for ad placement. We still do not anticipate sales commissions as there will be no dedicated sales teams in year 2. Other expenses such as legal advisory would be minimal, but we allocate $500 for annual corporate registration fees.

In sum, our SG&A costs in Year 2 come out to $4000.

Staff

We still anticipate minimal staff in Year 2, with no CEO salary.

We would however hire college interns (marketing) to optimize

our affiliate marketing conversions. The anticipated cost of 1 summer marketing intern would be $5000.

Below is an overall Revenue projection for 2025 as a waterfall chart:

As can be seen from the revenue projection above, we are now profitable as of Year 2.

Year 5 Revenue Projection We can extrapolate our financial models to project an anticipated revenue for Year 5 of Minfinity as follows.

At this point we anticipate enough market awareness to justify an increase to $20/month monthly subscription fee.

We anticipate increased website/app traffic of 80,000 visitors per month and a healthy 5% conversion rate in Year 5 due to finetuning our marketing efforts.

Lastly, we anticipate Advertising revenues of $800 based on the CPM of $10.

Below is the revenue chart for Year 5.

Exit Plan We should anticipate an exit event (either acquisition by a larger target such as Yelp, or sale to Private Equity) for Minfinity within the Year 5 horizon.

Below is a chart showing the progression of Annual Recurring Revenue (ARR) during the growth of the company.

With no seed funding/investment, we have been able to deliver almost 1.4M in recurring annual revenues. Based on typical funding patterns for companies in the B2C and Software as a Service (SaaS) domain, we expect a sale price of 10-12 times our ARR, so at least $14M. A successful exit will give me the financial means to retire young, give back to charity, and pursue passions such as traveling the world with my family and friends.

Appendix Financial Model:

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