Promerit Advertising offers marketing services for companies employing email marketing as the core of their campaigns. In Year 1, more than 250 billion emails are estimated to be sent. Email marketing is a cost-effective way to reach target audiences, with current ad-response rates averaging 5-15% according to Jupiter Communication research. However, only 15% of web users read all emails in full.

Promerit Advertising specializes in successful email marketing campaigns. The owners, Robert Humphrey and Cheryl Littlejohn, have over 8 years of combined experience. Robert led successful campaigns for Buy.com and Verison, while Cheryl led 800.com’s campaign before joining Robert for Verison.

Promerit Advertising will design, build, test, and deploy email campaigns. Real-time progress reports will be provided for maximum flexibility, and campaign analysis will be conducted to improve future campaigns.

Mission:

Promerit Advertising aims to offer customers the best methods and tools for successful email campaigns. Our campaigns will cut through mass marketing, increase sales, and enhance customer satisfaction. We will exceed customers’ expectations for campaign returns.

Advertising Agency Business Plan Example

Company Summary

Promerit Advertising designs, builds, tests, and deploys email campaigns. We also provide real-time progress reports to give our customers maximum flexibility. After each campaign, Promerit analyzes its success to improve future campaigns.

2.1 Company Ownership

Robert Humphrey and Cheryl Littlejohn are the owners of Promerit Advertising.

2.2 Start-up Summary

Robert Humphrey and Cheryl Littlejohn equally invest in the company and secure a long-term business loan. The following table and chart project Promerit Advertising’s initial start-up costs.

Advertising Agency Business Plan Example

Start-up Funding

Start-up Expenses to Fund: $34,500

Start-up Assets to Fund: $165,500

Total Funding Required: $200,000

Assets

Non-cash Assets from Start-up: $10,000

Cash Requirements from Start-up: $155,500

Additional Cash Raised: $0

Cash Balance on Starting Date: $155,500

Total Assets: $165,500

Liabilities and Capital

Liabilities

Current Borrowing: $0

Long-term Liabilities: $100,000

Accounts Payable (Outstanding Bills): $0

Other Current Liabilities (interest-free): $0

Total Liabilities: $100,000

Capital

Planned Investment

Robert Humphrey: $50,000

Cheryl Littlejohn: $50,000

Other: $0

Additional Investment Requirement: $0

Total Planned Investment: $100,000

Loss at Start-up (Start-up Expenses): ($34,500)

Total Capital: $65,500

Total Capital and Liabilities: $165,500

Total Funding: $200,000

Start-up

Requirements

Start-up Expenses

Legal: $1,000

Stationery etc.: $1,000

Brochures: $1,000

Advertising: $20,000

Expensed Computer Equipment/Software: $10,000

Insurance: $0

Rent: $1,500

Research and Development: $0

Other: $0

Total Start-up Expenses: $34,500

Start-up Assets

Cash Required: $155,500

Other Current Assets: $10,000

Long-term Assets: $0

Total Assets: $165,500

Total Requirements: $200,000

Services

The services offered by Promerit Advertising cover an email marketing project in its entirety, from concept to evaluation. The service includes:

– Designing the campaign

– Personalization and targeting

Email list management

– Building deployment system

– Testing the plan

– Implementing the campaign

– Tracking the campaign’s progress in real-time

– Instant measurability for ROI analysis

– Post-campaign analysis

Market Analysis Summary

According to an eMarketeer online advertising report, online promotions are powerful for both offline and online companies. Offline companies are now able to reach customer groups that use computers at work and at home. Consumers prioritize return policies, customer service, and product selection. 94 percent of surveyed users have shopped online before. 76 percent of those surveyed say promotions positively influence their buying behavior. Online coupons are especially persuasive for 50 percent of respondents, while 70 percent find offline coupons equally attractive. An email campaign can be used to reach target customers, regardless of the size of a company’s Internet presence, as long as the customer wants the product.

Market Segmentation

Promerit Advertising focuses on two distinct customer groups:

– Online companies with e-commerce

– Offline companies

Advertising Agency Business Plan Example

Market Analysis

Market Analysis
Year 1 Year 2 Year 3 Year 4 Year 5
Potential Customers Growth CAGR
Online Companies 630,900 820,170 1,066,221 1,386,087 1,801,913 30.00%
Offline Companies 1,500,700 1,500,700 1,500,700 1,500,700 1,500,700 0.00%
Other 0 0 0 0 0 0.00%
Total 2,131,600 2,320,870 2,566,921 2,886,787 3,302,613 11.57%

4.2 Service Business Analysis

The Internet is one of the fastest-growing commercial phenomena. The number of host computers, or servers, has exploded from 3.2 million in 1994 to roughly 79.2 million as of July 2001. During the same time period, the number of websites increased to more than 6 million from 3,000.

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The popularity of sub-$1,000 PCs is a key factor in the Internet’s recent growth. Rapidly falling component prices have allowed PC manufacturers to offer more affordable products. Computers sold at or below the $1,000 level have appealed to first-time PC users and lower income families. PC penetration in the United States is now approximately 50%, according to Dataquest, a market research firm based in San Jose, California.

The United States accounts for over half of the world’s total Internet users. When consumers are asked why they purchased a personal computer, the most common answer is to connect to the Internet and access email.

Strategy and Implementation Summary

Promerit Advertising’s strategy is to utilize the extensive network of contacts Robert and Cheryl have with companies sold on the value of email marketing. In addition, Promerit will use its internal expertise to launch an email marketing campaign directed at a select group of its target customers.

5.1 Marketing Strategy

Promerit Advertising will focus an email campaign on a select group of 50,000 businesses each fiscal quarter, reaching over two million potential customers. We estimate a five percent response rate to the campaign, generating 1,250 leads and 5,000 leads over the year.

Perform a SWOT analysis of your business to develop good strategies. Get started with our free guide and template.

5.2 Sales Strategy

Promerit Advertising’s sales strategy is to use the email marketing campaign as a model of success for its customers. Online companies will be the most accessible to our services, while initial sales may be weak with offline companies.

5.2.1 Sales Forecast

Below is the sales forecast for three years. Our deliverables are electronic, so there are no costs of sales. Labor costs are included in the Personnel table.

Advertising Agency Business Plan Example

Advertising Agency Business Plan Example

Sales Forecast:

Year 1 Year 2 Year 3

Sales

Online Companies $178,830 $270,000 $360,000

Offline Companies $47,000 $100,000 $170,000

Total Sales $225,830 $370,000 $530,000

Direct Cost of Sales:

Year 1 Year 2 Year 3

Online Companies $0 $0 $0

Offline Companies $0 $0 $0

Subtotal Direct Cost of Sales $0 $0 $0

5.3 Competitive Edge:

Robert Humphrey has five years of experience in email marketing campaigns and ten years of experience in direct marketing. He is a graduate of Ohio State University with a BA in marketing. Robert worked with several advertising companies before arriving at Kemp and Johnson Advertising in 1997. With Kemp and Johnson, Robert created and grew the Internet marketing group. Robert was project leader for the successful Buy.com and Verison email marketing campaign.

Cheryl Littlejohn graduated with a BS in computer science from UCLA in 1996. She immediately went to work for the Internet start-up Temple Communication as an IT administrator. She left in 1998 to join the start-up 800.com as the technical lead of its email campaign. In 2000, she joined Richard’s Internet group at Kemp and Johnson as technical lead of the Verison email marketing campaign.

Email marketing is an emerging marketing tool with few industry experts. Robert and Cheryl’s accomplishments over the past three years has been singled out by the industry as models for successful email marketing campaigns.

Management Summary:

Robert Humphrey will be responsible for tactical elements of the marketing campaign and Cheryl Littlejohn will manage the technical aspects of the campaign.

6.1 Personnel Plan:

In addition to Robert and Cheryl, there will be three other staff members:

– Secretary/Receptionist

– Accountant

– Salesperson

Personnel Plan:

Year 1 Year 2 Year 3

Robert Humphrey $32,000 $40,000 $45,000

Cheryl Littlejohn $32,000 $40,000 $45,000

Secretary/Receptionist $20,000 $25,000 $28,000

Salesperson $38,000 $50,000 $55,000

Bookkeeper $20,000 $26,000 $29,000

Other $0 $0 $0

Total People 5 5 0

Total Payroll $142,000 $181,000 $202,000

Financial Plan:

The financial plan is presented in the following topics.

7.1 Break-even Analysis:

The monthly sales break-even point is shown in the table and chart below.

Advertising Agency Business Plan Example

Break-even Analysis

Monthly Revenue Break-even: $19,308

Assumptions:

– Average Percent Variable Cost: 0%

– Estimated Monthly Fixed Cost: $19,308

7.2 Projected Profit and Loss

The table and charts below outline the projected profit and loss for three years. We estimate that the agency will not be profitable until the second year of operation. Promerit Advertising will grow by about 9% for the second and third year.

Advertising Agency Business Plan Example

Advertising Agency Business Plan Example

Advertising Agency Business Plan Example

Advertising Agency Business Plan Example

Pro Forma Profit and Loss:

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $225,830 $370,000 $530,000
Direct Cost of Sales $0 $0 $0
Other Production Expenses $0 $0 $0
Total Cost of Sales $0 $0 $0
Gross Margin $225,830 $370,000 $530,000
Gross Margin % 100.00% 100.00% 100.00%
Expenses
Payroll $142,000 $181,000 $202,000
Sales and Marketing and Other Expenses $48,000 $60,000 $80,000
Depreciation $0 $0 $0
Leased Equipment $0 $0 $0
Utilities $2,400 $2,400 $2,400
Insurance $0 $0 $0
Rent $18,000 $18,000 $18,000
Payroll Taxes $21,300 $27,150 $30,300
Other $0 $0 $0
Total Operating Expenses $231,700 $288,550 $332,700
Profit Before Interest and Taxes ($5,870) $81,450 $197,300
EBITDA ($5,870) $81,450 $197,300
Interest Expense $8,916 $6,999 $4,999
Taxes Incurred $0 $22,335 $57,690
Net Profit ($14,786) $52,115 $134,611
Net Profit/Sales -6.55% 14.09% 25.40%
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7.3 Projected Cash Flow

The following table and chart highlight the projected cash flow for three years.

Advertising Agency Business Plan Example

Pro Forma Cash Flow

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $56,458 $92,500 $132,500
Cash from Receivables $124,685 $248,971 $365,839
Subtotal Cash from Operations $181,143 $341,471 $498,339
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0
New Long-term Liabilities $0 $0 $0
Sales of Other Current Assets $0 $0 $0
Sales of Long-term Assets $0 $0 $0
New Investment Received $0 $0 $0
Subtotal Cash Received $181,143 $341,471 $498,339
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $142,000 $181,000 $202,000
Bill Payments $90,432 $133,818 $188,745
Subtotal Spent on Operations $232,432 $314,818 $390,745
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $20,004 $20,004 $20,004
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $252,436 $334,822 $410,749
Net Cash Flow ($71,294) $6,649 $87,590
Cash Balance $84,206 $90,856 $178,446

7.4 Projected Balance Sheet

The table shows projected balance sheet for three years.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $84,206 $90,856 $178,446
Accounts Receivable $44,688 $73,216 $104,877
Other Current Assets $10,000 $10,000 $10,000
Total Current Assets $138,894 $174,072 $293,323
Long-term Assets
Long-term Assets $0 $0 $0
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $0 $0 $0
Total Assets $138,894 $174,072 $293,323
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $8,184 $11,251 $15,895
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $8,184 $11,251 $15,895
Long-term Liabilities $79,996 $59,992 $39,988
Total Liabilities $88,180 $71,243 $55,883
Paid-in Capital $100,000 $100,000 $100,000
Retained Earnings ($34,500) ($49,286) $2,829
Earnings ($14,786) $52,115 $134,611
Total Capital $50,714 $102,829 $237,440
Total Liabilities and Capital $138,894 $174,072 $293,323
Net Worth $50,714 $102,829 $237,440

7.5 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 7311, Advertising Agencies, are shown for comparison.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 63.84% 43.24% 8.50%
Percent of Total Assets
Accounts Receivable 32.17% 42.06% 35.75% 36.20%
Other Current Assets 7.20% 5.74% 3.41% 42.20%
Total Current Assets 100.00% 100.00% 100.00% 80.80%
Long-term Assets 0.00% 0.00% 0.00% 19.20%
Total Assets 100.00% 100.

General Assumptions:

Plan Month 1 2 3 4 5 6 7 8 9 10 11 12

Current Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%

Long-term Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%

Tax Rate 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00%

Other 0 0 0 0 0 0 0 0 0 0 0 0 0

Pro Forma Profit and Loss:

Sales Month 1 2 3 4 5 6 7 8 9 10 11 12

$6,000 $6,000 $10,900 $12,030 $18,400 $21,000 $20,000 $23,000 $24,000 $24,000 $27,500 $33,000

Direct Cost of Sales

$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Other Production Expenses

$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total Cost of Sales

$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Gross Margin

$6,000 $6,000 $10,900 $12,030 $18,400 $21,000 $20,000 $23,000 $24,000 $24,000 $27,500 $33,000

Gross Margin %

100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

Expenses:

Payroll

$4,000 $4,000 $11,000 $11,000 $14,000 $14,000 $14,000 $14,000 $14,000 $14,000 $14,000 $14,000 $14,000

Sales and Marketing and Other Expenses

$4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000

Depreciation

$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Leased Equipment

$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Utilities

$200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200

Insurance

$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Rent

$1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500

Payroll Taxes

15% $600 $600 $1,650 $1,650 $2,100 $2,100 $2,100 $2,100 $2,100 $2,100 $2,100 $2,100 $2,100

Other

$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $

Pro Forma Cash Flow:

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Pro Forma Cash Flow
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Cash Received
Cash from Operations
Cash Sales $1,500 $1,500 $2,725 $3,008 $4,600 $5,250 $5,000 $5,750 $6,000 $6,000 $6,875 $8,250
Cash from Receivables $0 $150 $4,500 $4,623 $8,203 $9,182 $13,865 $15,725 $15,075 $17,275 $18,000 $18,088
Subtotal Cash from Operations $1,500 $1,650 $7,225 $7,630 $12,803 $14,432 $18,865 $21,475 $21,075 $23,275 $24,875 $26,338
Additional Cash Received
Sales Tax, VAT, HST/GST Received 0.00% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Long-term Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Sales of Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Sales of Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Investment Received $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Cash Received $1,500 $1,650 $7,225 $7,630 $12,803 $14,432 $18,865 $21,475 $21,075 $23,275 $24,875 $26,338
Expenditures Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12
Expenditures from Operations
Cash Spending $4,000 $4,000 $11,000 $11,000 $14,000 $14,000 $14,000 $14,000 $14,000 $14,000 $14,000 $14,000
Bill Payments $237 $7,119 $7,140 $8,141 $8,142 $8,563 $8,550 $8,536 $8,522 $8,508 $8,494 $8,480
Subtotal Spent on Operations $4,237 $11,119 $18,140 $19,141 $22,142 $22,563 $22,550 $22,536 $22,522 $22,508 $22,494 $22,480
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Long-term Liabilities Principal Repayment $1,667 $1,667 $1,667 $1,667 $1,667 $1,667 $1,667 $1,667 $1,667 $1,667 $1,667 $1,667
Purchase Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Purchase Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Dividends $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Cash Spent $5,904 $12,786 $19,807 $20,808 $23,809 $24,230 $24,217 $24,203 $24,189 $24,175 $24,161 $24,147
Net Cash Flow ($4,404) ($11,136) ($12,582) ($13,178) ($11,006) ($9,799) ($5,352) ($2,728) ($3,114) ($900) $714 $2,190
Cash Balance $151,096 $139,960 $127,378 $114,199 $103,193 $93,395 $88,043 $85,316 $82,202 $81,302 $82,016 $84,206

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