Squash Business Plan

SQUASH BUSINESS PLAN RATE THE UNRATED.

By Kalle Andersson | Sergio Zuniga Daniel Rodriguez | Yannik Rath

SQUASH LLC. BUSINESS PLAN Curso de Formaciรณn para el Desarrollo del Liderazgo Emprendedor

By Kalle Andersson | Sergio Zuniga | Daniel Rodriguez | Yannik Rath

BUSINESS PLAN Curso de Formaciรณn para el Liderazgo Emprendedor Given by Maria de los Dolores Gonzalez Saucedo August- December 2016

SQUASH BUSINESS PLAN THE INDEX Index The Team Executive Summary I.Description of Opportunity II.Setting Strategic Opportunity 2.1 Concept of the Business 2.2 Mission 2.3 Vision 2.4 Values 2.5 Value proposition and Competitive Advantage III.Entrepreneurial Team 3.1 Entrepreneurs Functions 3.2 Support and Networking Board of Directors 3.3 Critical Risks and Threats IV. Business model 4.1 Customer Relationship 4.2 Key Partners and Revenue V. Feasibility of the Market 5.1 Analysis of the industry 5.2 Analysis of the Competition 5.3 SWOT 5.4 Validation of Market 5.4.1 Validation by Target Market 5.5 Definition and Quantification of Target Market 5.5.1 Target Market 5.5.2 Quantification of Potential Target Market VI.Strategic Market Plan 6.1 Corporate Image 6.2 Strategy of the Product Service 6.3 Distribution Channels

6.4 Advertising Plan 6.5 Prices Scheme 6.6 Structure of Costs 6.6.1 Fixed Costs 6.6.2 Variable Costs VII. Technical Feasibility 7.1 Technical Description of the Service 7.2 Key Activities of the Service 7.3 Key Resources 7.3.1 Material Requirements 7.3.2. Equipment and Tools Requirements 7.3.3. Workforce Positions and Functions VIII. Organizational Structure 8.1. Main Positions 8.2. Organizational Structure 8.3. Salaries IX. Legal 9.1 Legal Constitution 9.2 Legal and Fiscal Requirements for Startups X. Financial Feasibility 10.1 Initial Investment 10.2 Financial Sources 10.3 Sales Forecast 10.4 Expenses 10.5 Projected Financial Statement 10.6 Breakeven Point 10.7 Analysis of Financial Feasibility XI. Annex XII. Bibliography

ENTREPRENEURS THE TEAM

THE ENTREPRENEURIAL TEAM (From left to right ) Kalle Andersson from Sweden, Yannik Rath from Denmark, Daniel Rodriguez and Sergio Zuniga from Mexico.

I. OPPORTUNITY THE DESCRIPTION We live in a world in constant movement, with the help of the internet we’ve experience a time of globalization and the exponential growth of the world in Demographic, Cultural, and Economic terms has led to a new world full of international opportunities yet a global standardization throughout the world called internet.

As the internet has become the revolutionary tool of the 20th Century tool, during the first part of the 21st Century we’ve learned and evolutionize with this tool in incredible milestones, the Iphone, Facebook and Social Media, became the catalyst of a new futuristic world of information sharing, the media content became available at the tip of our fingers, leaving great opportunities to those willing to venture on services industries.

During this amazing but quite peculiar and specific time of the history of humankind, where the flows of information, nonstopping exchange of data, we are still young to know the potential we can found and how to deal with it, for this reason, all the app, technology producers etc; have to come to understand that the key point to roll the dice on the macroeconomic growth industry, finding an opportunity and think big to hit that gold pot are way more visible and tangible than before.

As many of the millions users in Facebook

Platform,

there

are

other

applications where “rating” can be done, applications like ​Foursquare, Doodle, and

many more, they were all meant to rate or using the rate option in certain way.

We’ve

thought

that

there

an

opportunity to create an App that can work for the people to express their need to be heard, to be known and to collect come data about an specific topic.This is where Squash App comes from and “aims to do” its purpose.

II.STRATEGIC OPPORTUNITY THE SETTING 2.1 Concept of the Business

This opportunity will be attended through a web application that could be easily used by computers and mobile devices.The purpose is to create an innovative website application that helps users in the creative process of rating. The main focus is to create a technology that enables people to create categories in which they can make rateable posts. The service that will be offered is a personal profile in the application, a profile which can upload content, rate and vote up already existing content. An added opportunity to purchase a PRO account which gives the user certain privileges will be available. The target market is young people around the world, 15-20 years old, who are more likely to gain value from the application, create content and generate growth within the application.

2.2 Mission The business offers a simple way for people to get their questions, thoughts and ideas heard and criticized in an informal way. The mission is to create a forum for people searching to have their doubts solved by the general mass. This will create value for our clients as it enables them to sift out non interesting content and get necessary feedback that is honest.

2.3 Vision The vision of the business is to be the best rating app in the market and create value teaching users how rate and become a changemaker. A worldwide community in which we can change the lives of people into the better. The business will be positioned as a general platform with the aim to serve its users with entertainment, simplicity and with validity.

2.4 Values

As the mission and vision of the company there 6 strong values that will guide the way of the decisions to make and the work, building together the company and engagement of it to the stakeholders as we grow together with our mission, these values are to keep Innovative all the time as new technology change fast, to be Instantly Connected, keeping the squash users on constant connection, to be Customer Focused with Social and Information Value always on a strong Impact Focus.

THE SQUASH VISION, MISSION AND CORE VALUES

2.5 Value Proposition and Competitive Advantage As the opportunity section states, being entertained and getting useful and honest opinions of content at the same time is rarely achieved in nowadays social media. The people are afraid of posting content they’d like to get feedback on in regular social media because of dishonesty and discrimination. By creating the most relevant content for the user and receiving feedback with the right functions will return gain.

Being pioneers with an app that will be giving a service that no other app in the market focuses on, in fact the competitor’s apps use the “rating” feature as a compliment and not a whole, which leaves opportunity for an app like Squash.

Personalized service with the right planning and delivering to it’s users giving exclusiveness available. With all this we are convinced that Squash App will be a total success. Take a look at the following Value Proposition Canvas, where the app itself and the users are in an expected broad perceptiveness.

These pains will be relieved by creating a forum easily to be used and that enables new content to constantly be created and relevant, while having a well developed function for disapproving inappropriate content. The application differentiates from the competition by providing the function to view the most relevant content for you as a user, to receive feedback that is neutral, to get a variety of content, more or less serious. It also provides the function to be anonymous if requested and the function to report inappropriate content in an efficient way.

III.ENTREPRENEURS THE TEAM 3.1 Entrepreneurs Functions Public Relations - Kalle Andersson Develop a marketing communications plan including strategy, goals, budget and tactics. Also to develop media relations strategy, seeking high-level placements in print, broadcast and online media and coordinate all public relations activities.

Dealing and communicating with government and groups with regard to public policies, action and legislation.

Communication Department - Sergio Zuniga Create, implement and oversee communications programs, be it internal or external, that effectively describe and promote the organization and its products. Manage the creation and development of print and online advertising, email marketing, website management, content development, press releases, bylined articles, white papers, corporate videos and marketing collateral, RFP review and development, marketing budget development and cost tracking

Marketing Management - Yannik Rath Responsible for managing marketing, advertising and promotional staff and activities at a company or organization. Takes steps to measure, enhance, and enrich the position and image of a company through various goals and objectives and satisfy the needs and wants of the consumers.

IT Department - Daniel Rodriguez Manage information technology and computer systems, to plan, organise, control and evaluate IT and electronic data operations, to design, develop, implement and coordinate systems, policies and procedures and ensure security of data, network access and backup systems. Also, act in alignment with user needs and system functionality to contribute to organizational policy and manage staff by recruiting, training and coaching employees, communicating job expectations and appraising their performance.

3.3 Critical risks and threats On a particular manner of the business are the management risks, emerging risks, potential risks and critical enterprise risks. All of these risks can threaten the viability and execution of the Squash LLC. Business Model. These risks should be addressed and mean a significant point for the executive management and don’t go oversight.

There are several ways to overcome any risks, but it all starts with a Risk Assessment, which will lead to know the potential risks and illustrate the company filters to covey with impact and manage with ease.

IV. THE BUSINESS MODEL The business model canvas was created by reading the Business Model Generation by Osterwalder & Pigneur and then further on discussing and analyzing the different aspect and elements from the article.The main aspects are the Market/Customer segment, Value propositions, Distribution channels, Customer relations, Revenue model/stream, Key resources, Key activities, Key partners and Cost structure.

Not every social media user is the same or have the same needs. They use it for different purposes depending of which type they are. Most users are described as The Lurkers, which are the ones who is active on social media and is watching what everyone else is saying or posting, but isn’t joining the conversation or debate. You can say they lurk from a distance.

By the definition of the different types of social media users, made by firstdirect.com, it as possible to describe and adjust the features of the application to fit their needs the best. We also sorted out which kind of types we were thinking would be fitting for our application. The people we found most likely is written in the customer segment

4.1 Customer Relationship In the Customer relationship section these most likely users were analyzed depending on what we needed to do to satisfy their needs and make them keep using our application. These values were also collected in the Value proposition section. The Key activities are for defining what we as a company is supposed to do, to obtain the most feasible application.

Marketing is important to spread the name and to increase the user's. This application is heavily dependent on user activity. Therefore we also need to ​squash our ​Squashers. By this we mean, that we have to rate the different posters on the

application, which also helps satisfying the needs of the social media users that is most likely to post things. But it also gives us the ability to keep watch out for post or material we and/or others find to inappropriate, by frequently checking the worst rated users. Also updates by adding new features or fixing bugs is to keep the users satisfied and active.

4.2 Key Partners & Revenue The Key partners would be investors who are interested in funding this application and GooglePlay and AppStore so people are able to actually download it on their phone. To fulfill these criteria we defined the Key resources to be having an IT team, servers and to get validation from GooglePlay and AppStore. This isn’t for free of course, and in the Cost structure section, every outgoing flow of money is defined.

That includes obvious things as payroll and development of the application, but also law-related costs, marketing and IT-related costs, for maintaining the app and for the use of servers.

To make it a successful business we also have to earn some money, and that is defined in the Revenue stream. The basic idea behind the application is to have two different types of accounts: the Basic, which is for free, and the Pro account, which you have to pay for. Both of the accounts lets you have the same possibilities in the application, but the Basic have a limitation for how many posts they are able to upload per week.

This urges the most heavily social media users to pay for the Pro account to get their daily “fix of likes” – this especially relates to ​The Approval Seekers, The Quizzers and ​The Informers. The application would also make it possible to do spontaneous in-app purchases to for example unlock different features. When the brand is big enough, it will open up for the ability for companies to promote their own brand by posting ads.

THE SQUASH BUSINESS MODEL CANVAS

OPPORTUNITIES Don’t just happen, you create them.

V. THE MARKET FEASIBILITY 5.1 Analysis of the Industry It can not come as a surprise to anyone that the social media market is here to stay and is only growing bigger and bigger. It has now come so influential that it is completely changing people’s habits and social behavior. The social media is basically taking over our social life. This has created a group of people who always are seeking approval through these channels. So by creating that simple and easily helps people to find their approval or to seek out comments from others, we can create and entire new community.

5.2 Analysis of the Competition The biggest fish in that sea right now is of course Facebook, which allows people to obtain the same features. The way that our application is separating from Facebook, is that not everyone is comfortable posting random photos or questions on Facebook in fear of being judged. Facebook is also primarily allowing people to get reactions from other people who are on their friend list. So by giving the users an opportunity to create an anonymous account they can hide their identity, so they won’t be judged, and will feel more comfortable posting more sensible subjects. The feature of having the posts separated into groups of same subjects, allows the users to reach a specific audience with their posts, and it also works as a filter for the lurkers, so they only see, what they want to see.

There are some other rating applications for different subjects on the market, but ours stands out by collecting a lot of different subjects, so you can both rate your boss/teacher and/or a random person’s outfit for the night. This will urge the users to change to our app, because it collects every subjects that might interest the specific user so they don’t have to have a lot of different applications filling up the space on their phone.

5.3 Business SWOT

Strengths

Weaknesses

We have a strong market to start with and also we have a well balanced team since all of us have very different competences and skill sets.

Nobody from our team has experience starting a business

Opportunities

Threats

One of our cofounders will be developing the idea by himself, so there’s no need to hire extra people, also his expertise developing systems is a very good opportunity for the business.

Already-known social media sites could develop and integrate something similar to our idea in their sites, which would probably leaves us out of the market,

5.4 Validation of the Market After doing some research about how people is interested nowadays in social media, we’ve found that our idea is something that a lot of people is actively wanting and looking for. After the interviews we found out that even the people that didn’t have any preconception of the idea, before the questionnaire, ended up very attracted to the app and wanted to know more about it. It is important to note that the interviews were done with the target market only, meaning that the idea might not be suitable for older people, but since our target market are young people that actively uses any sort of social media sites, we validate that our idea would be indeed of great interest to these persons. They did gave some feedback and helped us shape a little bit the app. For example one person mentioned the possibility of choosing whether you want your rating to be anonymous or not. Apparently most of the persons were interested on having the ratings be anonymous rather than knowing who rated what. The interviews that were done to these persons are presented further down in this same document.

5.5 Definition and Quantification of Target Market.

5.5.1 Target Market The target market will be the users we believe will be more attracted to our application, and that population ends up being from teenagers all the way to grown up man. We believe that most of the concentration of our users will be somewhere between 15-25 years old. Not to say that people outside of this range won’t be able to use it, but we believe people within this range will be more active and more involved in it. This is validated by the interviews we conducted about our application in which we concluded that the more experienced the use is with social media sites, the more interested are in our application. Since most of the users of the most famous social media sites are within this range, we expect the same for our application.

5.5.2 Quantification of Potential Target Market The quantification of potential target market was pretty much straight forward. Since there is nothing required to interact with our service other than a phone with internet connection, so basically every person with a phone and internet connection becomes a potential client.

According to the Statista Diagram, the most popular social media apps during the 2016, are Snapchat and Facebook, but even though we have great competition there is an enormous increase in users.

MOST​ USED SOCIAL APPS

SOCIAL ​MEDIA USERS

According to the Global Digital Snapshot, there is 3.419 Billion of people using the internet and 3.790 Billion making use of Mobile Apps and from all those millions of people our targeted market gets reduced to 1.968 Billion of people which still leave a way from over the giant companies as Facebook or Instagram and Twitter to think of them as targeted market.

VI. THE STRATEGIC MARKETING PLAN 6.1 Corporative Image

We wanted to come up with a name that would be catchy and that had a meaningful and symbolic quotation that is in line with what we’re trying to achieve with the project. We thought of many names by brainstorming and playing with letters and a wide variety of compound words. We wanted to come up with a word that could be able to replace the verb of “Rating”, since we want that the application to become a “Top of Mind” for the users while raiting. The idea is to create a name which similar to the music application “Shazam”, makes people use it in sentences when wanting to discover the name of a song.

After some time we came with the word “Squash”, like the racket sport, making a comparison between the game and what we are trying to portrait with it. There is a huge allegory between our App and the game. While the main idea of the game is to hit a ball to a wall with a racquet and alternate it between the players and the wall. In our App, the users will be the players, the App or medium will be the racket and the ball the message or topic.

The ball will be alternated by the players just like the messages within the app between the users which will lead to a dynamic use of information. This would basically be called to “Squash” something, a certain type of content.

There are three available domain and company names that might be of interest to us. ● ● ●

www.squash.club www.squash.guru www.squash.online

6.2 Strategy of the product or service Our differentiation strategy is to give Internet users the opportunity to rate or give feedback instantly to content, anonymously or personally, in certain desired categories. This enables people to sift out undesirable content easily, while getting honest and useful feedback. This may however not have to be all serious, which creates entertainment in the field of rating only enabled in certain non general forums.

The app will be different from Facebook, Instagram and other similar applications in the way that the rating experienced is taken advantage of. Just as Instagram takes the photo and video experience out of facebook and as Twitter takes the status writing experience, Squash will take out and improve the rating experience. Not only will it be easier to rate and have your own content rated, it will also be a lot faster as the “voting up� content enables users to see the most relevant posts and happenings directly, without having to scroll up and down as in Facebook or Instagram.

The app Yodel, created by Scandinavian entrepreneurs, has a similar concept as Squash. But by adding the video and picture function to the rating and up or down voting function, we will be substantially differentiated from all the competition we can identify today.

6.3 Distribution Channels The distribution channels chosen is appstore, google play and the website. These types of distribution channels are advantageous because of the simplicity and transparency they provide. By using these three channels we can reach iphone/ipad and android users as well as laptop users.

The costs of using these channels are presented in the chart below:

AppStore Register

Google Play

Website

25 USD

Domain name

10 USD/year

In-app purchases

30 % sales

30 % of sales

Web hosting

10 USD/month

App purchase

30 % of price

30 % of price

Software

399 USD

Membership

99 USD/year

6.4 Advertising Plan

Social Media Facebook

Social Media Instagram

Social Media Others

Email Marketing

Costs

40 %

40 %

10 %

10%

Dates

Immediately

Immediately

6 Months

6 Months

As our customers are experienced social media users, we will use these channels as our main channel for advertising. This is an effective strategy, both in terms of reach and cost.

We will use content marketing for our facebook strategy. This will create value for our potential customers and help building our brand, instead of traditional facebook ads which is statistically seen as spam and non valuable.

For our Instagram strategy, we will use promotors. This means that we will sponsor people with a big following and influence in the network we are trying to reach. We will offer them in-app benefits and sales bonuses depending on the result of the campaign. Although measurement methods for these types of investments are hardly existing, we can still make assumptions of how we can create a beneficial sales bonus system.

After 6 months we will adapt to other strategies. This is to be able to reach other segments who are more likely to respond to other forms of marketing. Email marketing for instance is a very cost effective way of marketing and will consist of invitations and discounts.

6.5 Prices scheme

The pricing of our services will be based on costs, the desired utility and the competition.

Our strategy is to manage prices of the pro accounts and in app purchases of around 10 % below competitive prices since we in the early stages don’t offer a significant amount of added value, due to small numbers of users. We will consider the fixed costs and our sales prognosis in order to set minimum prices for the calculated break even point.

6.6 Structure of costs 6.6.1 Fixed costs Development of application

Maintenance and updates of app

500 USD

50 USD/month

6.6.2 Variable costs Cost of having serverspace (.com domain) 13 USD/year (in the start) 11 USD/year (after rise in popularity)

VII. THE TECHNICAL FEASIBILITY 7.1 Technical description of the Service An online application, that will be a changemaker on the process of gathering information.

The Squash App will be focused in any target market, but at the startup time will be expected to to a young college population and potentially grow into other markets and variety of stakeholders.The service will operate online and will only require the users to access it through a web browser. The service will be produced with a coding framework called Laravel. All the data will be stored on a database so that data mining can be done on later steps to see how we can improve the service later.

7.2 Key Activities of the service.

The application will be focused on creating the user interface, classes and database, for the users to build interactions within the database, this will lead to a unit testing of the app, as for the users the integration of the data and app interface will be the launching point.

7.3 Key Resources 7.3.1 Material Requirements Material

Provider

Cost

Private repository

Github

$5 USD/mo

Web hosting

Digital Ocean

$5 USD/mo

Payment service

Stripe

2.9% per transaction

Domain

Namespace

variable

7.3.2 Equipment and Tools Requirements

The tools needed for the production of our service are very reduced. A computer for the developing of the software will be needed throughout the whole development process. The computer must have PHP7 and MYSQL installed. When the product is finished and to be released, a server must be provided for the app to work with Ubuntu operating system, PHP7 and MYSQL. This server should be running all days with no exception, and in case of a failure, it should be back up in no more than 2 hrs after the breakdown. During the development process a private repository for versioning the software must be acquired (either paid or free, depending on the provider selected), and also a subscription to some sort of payment service needs to be acquired (Stripe is recommended).

7.3.3 Workforce Positions and Functions Position

CEO & Public Relations

CCO & Community Operations

Human Resources

System Administrator

Activities

Profile

Studies

Skills

Develop and execute strategy to create shareholder value.

Implement the Company's long and short term plans.

Man / Woman 23/40 años

Undergrad uate / Graduate

Finance Office Skills Well Presented Technology Public Speaker

Provide customer support to users, maintaining the company’s Social Media Presence.

Man / Woman 23/35 años

Undergrad uate / Graduate

Photoshop Illustrator, Office, Internet, Design Skills Public Relations

Hiring and recruitment of the overall team members

Man / Woman 23/30 años

On Going Studies /Undergra duate

Office, Telephone, Outlook Social Media Well Presented Supportive Organized

Management and support of the IT system environments.

Network operating systems

Man / Woman 23/35 años

Undergrad uate / Graduate

Photoshop Illustrator, Office, Internet, 3DMax, Maya.

Mac User.

Design Skills

VIII. ORGANIZATIONAL STRUCTURE 8.1 Main Positions Chief Executive Officer Role: ​Develop and execute strategy to create shareholder value.

Responsibilities: ​Responsible for all day-to-day management decisions and for implementing the Company's long and short term plans. The ​CEO acts as a direct link between the Board and management of the Company and communicates to the Board on behalf of management.

CCO & Community Operations Role: ​Provide customer support to users, maintaining the company’s Social Media Presence.

Responsibilities: ​Responsible for the creation and development of communication strategies to increase and improve the company’s perception interior and externally.

Human Resources Role: ​Hiring and recruitment of the overall team members.

Responsibilities: ​Preparing job descriptions and ensure proper procedures of each department level and reviewment of the new hired recruitments providing and oversight.

System Administrator Role:​ Management and support of the IT system environments.

Responsibilities: ​Network operating systems management and support and the development and operation of technical testing programmes.

Public Relations Role: ​Management of reputation and key messages communication.

Responsibilities: ​Researching, writing and distributing press releases to targeted media, and commissioning Market Research.

8.2 Organizational Structure

8.3 Salaries Position

CCO & Community Operations

CEO & Public Relations

Human Resources

System Administrator

Marketing Management

Salary

$10,000 MXN

$12,000 MXN

$10,000 MXN

$10,000 MXN

$10,000 MXN

Law Benefits

Company Benefits

Total Salary

Empowerment Holiday Year Bonus Social Security Training

Bonus for Successful Operations

Empowerment Holiday Year Bonus Social Security Training

Expenses Paid Holidays

Empowerment Holiday Year Bonus Social Security Training

Extra Paid Hours Paid Holidays

$10,000 MXN

Empowerment Holiday Year Bonus Social Security Training

Extra Paid Hours Paid Holidays

$10,000 MXN

Empowerment Holiday Year Bonus Social Security Training

Extra Paid Hours

$10,000 MXN

Gas Bonus Paid Holidays

Gas Bonus Expenses Paid Holidays

$12,000 MXN

$10,000 MXN

V. LEGAL A. Legal Constitution Our business will adopt the limited liability company (LLC) juridical constitution. We chose this because this type of company is widely used by foreign investors in Mexico because of its "pass-through" modality and its "check the box" capability under the IRC (Internal Revenue Code of the U.S.)

B. Legal and fiscal requirements to start a business 1.Register Register it on www.tuempresa.gob.mx. For this, you would need your CURP, RFC and Firma Electrónica Avanzada (FIEL). This FIEL, is a unique key that will be generated based on your fingerprint, with no cost at all. You only need to go to the government site (SAT), to make an appointment and get the required documents.

2. Company’s Name Register your name or the company’s name with your FIEL on the government site.

3 Reserve Social Denomination Reserve your social denomination and choose your juridic regimen for your company.

Some options are: - Sociedad Anónima de Capital Variable o S.A. de C.V. - Sociedad de Responsabilidad Limitada o S. de R.l.

- Sociedad en Nombre Colectivo o S. en N.C. - Sociedad en Comandita Simple o S. en C.S. - Sociedad Anónima o S.A.

4. Notary Registration Go to the public notary that you choose to constitute your company. You should bring the following documents: - Original y fotocopia del comprobante de domicilio fiscal (original para cotejo).

- Copia certificada y fotocopia del documento constitutivo debidamente protocolizado.

- Original y fotocopia de cualquier identificación oficial vigente con fotografía y firma expedida por el gobierno federal, estatal o municipal del representante legal.

- Copia certificada y fotocopia del poder notarial con el que acredite la personalidad del representante legal o carta poder firmada ante dos testigos y ratificadas las firmas ante autoridades fiscales o ante notario o federatario público (cópia certificada para cotejo)

X. THE FINANCIAL FEASIBILITY 10.1 Initial Investment The minimum capital required to start business operations estimates to 285 000 pesos. The premises and assumptions are presented in the graphic below. The complete initial investment estimation is located in the annex.

Investments

Details

Assumed worth

Computers

Three relatively new Mac computers, one Alienware

$80 000 MXN

Car

Mazda 3, 2010 model

$130 000 MXN

Mobile devices

New and old Iphones and Android mobile devices

$55 000 MXN

Cash

Money for diverse initial costs

$20 000 MXN

Total

$285 000 MXN

10.2 Financial Sources According to our research, the best option to cover the initial investment is to invest with our spare money. Since we’re developing an application we have relatively low initial costs which we can cover by our own to remain independent and flexible. Although, in the future we will need investments from various parts to be able to keep having a big focus on app development while being able to hire salespeople. We will be looking for these investments in different forums, bank loans, private investors etc.

Concepto

Monto

Terreno y Edificios

-

Acondicionamiento de Local

-

Maquinaria

-

Equipo de CĂłmputo

80,000

Equipo de Transporte

130,000

Mobiliario y Equipo de Oficina

55,000

Inventario Inicial

-

Efectivo de Reserva

20,000

Otros

-

Contratos de Servicios

1,600

Gastos de Constitución

-

Promoción Inicial

20,000

TOTAL

306,600

10.3 Sales Forecast Our sales numbers comes from three different sources; pro account purchases, in-app purchases and advertising in our app. We predict that the majority of the sales during our first year of operation will come from pro account purchases since we need to develop a decent number of users before we can attract advertising companies. Furthermore, we predict that we will have a constant pricing for the advertisement and then increase it by 50 % during year 3.​ ​(See annex)

10.4 Expenses We anticipate that the expenses will be the same over the three years that we present. This is because our expenses consists of relatively constant costs; salaries, rent, telephone and traveling. Since we don’t require to meet potential clients on a physical place, we assume the traveling costs to be constant. (See annex)

10.5 Projection of Financial Statement 10.5.1 Income Statement The projection of the incomes will be of exponential character. The total incomes for the first year will be anticipated to $7200 MXN followed by $433.000 MXN and ultimately $1.036.000 MXN.

Balance Sheet For the first three years of operation, we will have negative results in all three years.

Although, we see a clear and strong increase in results over the years due to the increased incomes. Therefore we expect the breakeven point to be in the 4th year. (See annex)

Cash Flow Since we anticipate our expenses on a relatively stable level during the three initial years, we will have have a cash flow depending on our income for the time minus our constant costs.

These constant costs will vary around $68.989 MXN. Also, although 30 % of our gross income will go to the platforms, we don’t calculate these sums as expenses but rather have it calculated on from the beginning in our income. Therefore, if we say that our income is on a certain level, our real sales number is actually higher. (See annex)

10.6 Breakeven point In order to reach a monthly breakeven point, the income needs to exceed $68.989 MXN each month. This is equal to selling solely 2300 pro accounts each month. In our prognosis we have accumulated that the monthly breakeven point will be achieved in march 2018. That month we expect to sell for $104.000 MXN, although this will account for the first quarter of 2018. Therefore, we won’t expect a complete monthly breakeven point until the end of the 3rd quarter in 2019 where we expect to sell for $270.300 MXN, which is exceeding the breakeven level at $207.000 MXN.

10.7​ ​Analysis of Financial Feasibility

By comparing our products to similar functioning products on the market, we see that we share a lot of similarities, but also differs in other subjects, thus making our product feasible.

From the above analyzation of the breakeven point, we recognize that we have to work hard and put in extra effort the first couple of years without really getting anything in return. But light is at the end of the tunnel, and that tunnel ends in march 2018 (according to our calculations and analysis), where the Squash Company for the first time will cross the breakeven point. It is more than common to have losses in the first years of launching a new product, so the key to success is persistence and hard work.

Most social media applications don’t create a huge profit in the first couple of years.

Especially if they aim to be a free downloading application. The way they transform them into multi-million companies, is by creating a name and a brand, and through that creating a market for advertising and/or marketing. From our analysis we find that to have the highest feasibility we need to make the application free for all (just like two of the most popular apps: Facebook and Snapchat), to capture as many users as possible. The most addicted users have the possibility of updating their account to a Pro version, achieving more options in the app.

The dependence of creating a name and a brand in order to turn the company into a multi-million business is a tricky and risky strategi. It is a make or break strategy and therefore it is one of our major vulnerabilities. If the product is not attractive enough for the users to download and to enter and use regularly, it is going to be impossible to create a strong brand. Therefore a smart advertising has to be launched in the beginning of the applications release. This will help to spread the name around for the people to know about the application and to actually download it. After they have download it, the application needs to have an easy and user friendly interface to maintain the users. If the applications is to advanced users will more easily stop using it. Another important step to keep the users active is to constantly updating the application and bringing in new features to keep the users curious. A good example of this is the game application Candy Crush.

Candy Crush started as a free downloading game application, where the main objective is to switch the place of two pieces of candy to remove or create better pieces of candies. The interface is easy to use and by achieving new levels the users keep on playing.

To maintain the users, Candy Crush have added a lot of new features to gain “presents� in form of special candy to use in different levels. This helps with keeping the game interesting and is making the users come back for more. Another smart, but something times underrated, feature is the limited amount of games you can play. You have a maximum of 5 lives, and every time you lose it takes 20 minutes to regain your life. This is a strategy made so the users don’t get tired of the application too quickly, because it forces them to close the application before they wanted to themselves and therefore triggering an urge to reopen it again when their lives are back again.

This is almost directly transferred to our basic accounts of the Squash application, where the users have limited options per day. So by studying and analyzing the most popular social media and free downloading game applications, we find that the solution to our vulnerability is an easy user interface with a constant update and new features for the application, with the possibility of in-game purchases for the most addicted and hardcore users. When the breakpoint is reached in 2018, a more heavily marketing strategy is to launched to enhance the name of the brand and by this making the company an interesting and valid option for big companies to use as a media for advertising.

XI. ANNEX Financial feasibility Initial investment

Sales Forecast

Expenses

Balance Sheet

Cash Flow

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