Mailing List Service Business Plan
FOREST MAIL SERVICE
8380 Prospect Blvd.Seattle, WA 98102
Forest Mail Service is a mailing list service business designed to assist small business owners with managing their direct mail efforts. Forest Mail Service provides database management of a business customer base to include list verification, merge/purge services, and lettershop services. Additionally, Forest Mail Service assists the business owner with direct marketing consultation in conducting a direct marketing campaign. This plan reviews the current market, competition, skills, and financing required to successfully build a mailing list service.
- EXECUTIVE SUMMARY
- DESCRIPTION OF BUSINESS
- PRODUCT OR SERVICE
- THE MARKET
- PRODUCTION & OPERATION
- FINANCING REQUIRED
- MAJOR RISKS & PROBLEMS
- FINANCIAL STATEMENTS
Forest Mail Service is a home based sole proprietorship mailing list service business designed to assist small business owners in the Columbia Basin with managing their direct mail (or marketing) efforts. Forest Mail Service will provide database management of a business customer base to include list verification, merge/purge, and also provide lettershop services. Additionally, Forest Mail Service will assist the business owner with direct marketing consultation in conducting a direct marketing campaign.
A data search reveals there are over 1100 small to medium businesses in the Columbia Basin region of Washington State. Currently, there isn't a business devoted to providing mailing list services in this region. One local firm does provide some mailing list services, but this service is an off-shoot of their printing business. They are viewed almost universally by other businesses as extremely expensive. Many firms will not deal with them due to their costs.
Preliminary analysis indicates that there is a market potential of approximately $100,000 in potential mailing list services. That market is expected to mirror the growth rate of the region at 5% per year.
The Five year goal would be to capture at least 45% of this market while keeping expenses approximately 22% of sales. Sales would be expected to achieve at least $54,000 after five years. Initial expectations would be to remain as a home based business to minimize expenses and maximize owner equity and salary.
Initial financing will come from redemption of owners mutual funds. Start up costs and cash reserve are projected to total slightly over $17,000 with additional capital purchases in year one of $4,000.
My business will adopt a three prong marketing strategy. One will be advertising in the local Yellow Pages under Mailing List Services.
The second part will be conducting a direct mail campaign to prospective businesses in the region followed up with telephonic contact. All direct mail products will focus on letting the business owner know that it is cheaper to keep an existing customer and track his purchases than it is to solicit a new customer. Additionally, I'll explain the advantages to the owner of having my firm provide them the mailing list and lettershop services at a cheaper cost than they can do it for themselves. This becomes especially important given there are expected dramatic changes in the next year on direct mail procedures and costs.
Lastly, through my marketing efforts and customer support, I'll establish my self as the local expert for mailing list services and direct marketing consultation. This will be accomplished by conducting training seminars for local businesses and continuous networking with other business owners at various local functions/meetings.
DESCRIPTION OF THE BUSINESS
Exactly what products and/or services will be sold? Forest Mail Service will provide mailing list services including: a) mailing list or customer database maintenance, b) merge/purging of existing or acquired mailing lists, c) list broker services, d) lettershop services, and e) direct marketing consultation focusing on cost analysis, mail design and conduct of a direct marketing advertising campaign.
Who will be the primary customer groups (market segments) for your product or service? Small business owners located in Seattle, WA. Any business owner who tracks his existing customer base or desires to target new or potential customers through direct mail advertising is a potential customer. Potential customers could include (but not limited to) those operating the following businesses: insurance companies, software companies, dry cleaners, non-profit groups, magazine publishers, janitorial and house cleaning services, beeper and paging services, answering services, doctors, dentists, chiropractors, opticians, gardening and landscaping services, accountants, chimney sweeps, plumbers, video stores, local grocery stores, dog grooming services, veterinarians, hotels, motels, caterers, public relations agencies, real estate agents, newsletter publishers, and stock brokers.
What are the uses of your product or service by the customer groups? The principle use of my service is to maintain an accurate, up-to-date customer database that may be used by a business owner. This database may also be used to track customer purchases, trends, etc. for direct marketing to people in the database. My service will ensure that there are no duplicates in the mailing (reducing costs of printed materials and postage costs), that the addresses are deliverable by the United States Post Service (USPS), and that the postage for the mailings is as inexpensive as possible using discounts offered by the USPS. I would produce mailing labels for the customer that would include delivery point bar coding in order to take advantage of existing or future postal discounts. I'd also be able to generate the mailing in carrier route sequence (assuming there are sufficient mail pieces to qualify for the discounts). If desired, I could affix the mailing labels to the mailing piece and/or insert contents into the envelopes to be mailed. I would be able to apply postage to the mailing piece at the correct amount, minimizing costs to the customer. I'd prepare the mailing for processing by the USPS, to include preparation of all applicable forms and records. Lastly, I'd deliver the mailing to the USPS for the customer. A side product of this database would be printing for the customer, lists or rosters or contact sheets that could be used for a multitude of things within the business.
Additionally, I could provide assistance to the customer who desires to expand his database by assisting them in acquiring or renting specific mailing lists and then merging those lists with the other lists the owner may desire to use. I'd ensure that there are no duplicates in the final product, by purging any duplicates. Again, I'd be able to verify that all addresses are deliverable by the USPS.
If a business owner desired to market his existing mailing list, I could serve as his list broker and help market that list so others would rent it from him. As a minimum, Fdensure his list was placed in the Standard Rate and Data Services Mailing List directory.
Lastly, I could serve as a consultant to a business and help them determine the cost of doing a direct mail advertising campaign and whether it would be profitable to use direct marketing based on their profit margins. I could assist him in identifying all relevant costs and projecting his revenues from the mailing. I could assist him in locating a printer to design a mailing piece that will minimize his mailing costs based on guidelines established by the USPS. Additionally, I could assist the owner in advising them how to conduct the direct marketing campaign in terms of content, timing, follow-up, and statistical tracking of their customer response. As a part of this campaign, I would assist in testing their mailing effort so they don't spend any more than is necessary on their direct marketing effort. By testing the mailing, the customer would have a high confidence level that the direct mail campaign will achieve the desired results when a full rollout direct marketing effort is made.
Why will customers want to buy your product or service? Customers of Forest Mail Service would be taking advantage of my continuing knowledge of the USPS mailing regulations and how to maximize the amount of mailing they can do at the minimum cost. I would stay abreast of all changes to mail regulations and be able to capture the lowest possible postage costs for my customer. My knowledge would also save the customer the need to understand the USPS regulations and procedures for preparing and delivering a mailing to the USPS for mailing.
I would be able to save my customers time that they are spending on maintaining their customer lists. I'd be able to do the data entry, maintenance, and address verification for them, ensuring that accuracy of data and removal of any duplicates in their data. By saving them time, I would allow them to have their employees focusing on other priorities within their business and not having to concern themselves with this routine but critical and costly function.
I can provide accuracy in their mailing addresses by ensuring the mailing has deliverable addresses. I would accomplish this by checking their mailing list against a software program that has a listing of all of the deliverable addresses in the United States. The program has been certified (Coding Accuracy Support System or CASS) by the USPS and has greater than 98% accuracy on all addresses. I would then be able to correct almost all of those undeliverable addresses for the customer prior to the mailing. For these addresses not corrected, I would be able to provide a list with explanation(s) why the address was not deliverable.
My business will be able to provide the necessary output for the customer in whatever form he desires. From the existing database, I can provide mailing labels, reports, rosters, etc. for the customer for their use.
I would be able to provide the customer security and safeguarding of his data information. As the sole proprietor (and only employee), only I would have access to his data. Additionally, I'd ensure a backup copy of his data is maintained at another location, off of my business premises. If he rented his mailing list, I would monitor his data for unauthorized use. I would ensure that the data is tracked during and after the authorized rental period to preclude theft of their data.
Lastly, a very significant reason customers would want to use my service is: I can save them money while increasing their income. By achieving the lowest possible postage costs (through use of discounts), I am assisting them in getting their advertising message to their customers for the lowest price possible via direct marketing. Through the use of my bulk mailing permits, I have saved them that cost ($180 per year for First Class PreSort and Bulk mail permits). I will also save them mileage costs by providing free pickup and delivery of their mailing list information and mailing pieces. I will prepare the mailing as necessary and then deliver that product to the USPS for processing or back to the business if they desire. Through effective direct marketing assistance, I will be able to increase their sales and incomes assisting them in more effectively targeting their customers with their advertising campaigns.
Give the names of such customers and summarize their reactions to your product/service.
Halley's Landscaping: Seemed very interested, looking for someone to do complete DM effort, mailing, printing, database management. Owner stated that his time is worth $65/hr, needs someone to help out in this area. Has looked at Seattle firms, but prices were too high. Won't go out of region for service (e.g. Wenatchee, Spokane, etc.) Spoke of need for computer instruction services (specifically CAD and accounting programs). Stated there were other firms that needed assistance with computer instruction. Potential for spin off business if mailing services doesn't take off initially.
Sunshine Carpet Cleaning: Been in business for five years. Would be interested in increasing advertising and ability to target customers. Also seemed interested in ability to send reminder notices using customer database. Not very familiar with direct marketing aspect. Seemed positive towards the business.
Seattle Chamber of Commerce: Has heard of a couple of people discussing similar business, but hasn't seen anyone definitely providing the service. Stated I would need to educate the business owners in the region to convince them about the service. Most businesses don't advertise, if they do it is in the local paper.
Ephrata Chamber of Commerce: Acknowledged there is no similar service in the region. PK Printing is too pricey and doesn't readily advertise. Chamber has directed/advised a couple of people to check them out. They believe that there is a need for the service. When asked about member listing and they said that the listing is only given out to Chamber members, for myself that would be $50/year. Good feedback, also indicated that they would be willing to set up a presentation to the Chamber. They meet first Tues. each month at 7:00 AM. Need to lock in the presentation several months before hand. They indicated I'd be able to get positive feedback from the Chamber and be able to give/get education with the members. Could also join at that time and get the list for future use.
Pat Evans Tire: Parent company provides invoices and does the mailing preparation. Local office stuffs envelopes with promotions and sends them out. Not seeing good results from that effort. Willing to look at other advertising methods, currently using paper, radio, TV. Seemed interested in testing DM approach. Discussed using postcards as initial testing of DM trials to gain attention from recipient. Won't use any advertising not based in Ephrata.
Smith's Realty: Believes that with the right marketing approach, it could be a go. The need to educate businesses concerning DM is necessary. Didn't believe his business would benefit from it, but did see potential for other businesses (cited Gilligan's Men's Store for example).
How will you overcome any negative customer reactions? Unfamiliarity with the use of database management for mailing list services and the subsequent use of bulk mailing as a part of a direct marketing effort seemed to be the single greatest concern voiced by the business owners. My plan to overcome this in the market would consist of the following efforts:
Offer a free consultation to entice the owner to hear about the advantages of using mailing list services for direct marketing and how it could be used to increase their advertising effort for their business. Would also have cost breakouts to show what profits the business would need based on the success of the direct mail in order for the direct marketing effort to be profitable (include all costs broken down by mailing, printing, etc.)
Offer to provide seminars or serve as guest speaker to various local businesses' breakfasts and luncheons (e.g. Chamber of Commerce, Rotary, etc.) Another possibility is to advertise and host a 45-60 minute presentation as a seminar to business owners.
Because the majority of this small sample didn't currently use mailing list services and direct marketing (except for Pat Evans), I would need to show how DM will favorably compare (in terms of cost and resultant sales) as opposed to radio and local print media. Halley's Landscaping did desire to use DM but the cost was too prohibitive as quoted by the only firm in the area. The most positive aspect was that I didn't get any rejections from any of the owners as to the potential of the business. They did seem to acknowledge this is a niche business that would take some time for positive results to emerge and word of mouth would be important to reinforce the success of the business.
THE PRODUCT OR SERVICE
To be the basis of a business, the product or service offered must be technically feasible, it must have some competitive advantage, and its cost and time of development must not be prohibitive compared to its potential. This section is designed to evaluate these issues in a preliminary way.
What is the current stage of development of the venture's product or service? The mailing list service offered by Forest Mail Service is in the preliminary stage. The only restriction from actually beginning the service is my relocation into the Seattle Area (specifically) and the initial set up of the business (administrative and purchase of business resources). The necessary technical skills I would need to operate the business follow:
Lettershop operations. To gain proficiency in bulk mail operations, I will take USPS bulk mailing classes in Syracuse NY in Oct 95 and then some refresher training in spring 96.
Mailing List software (PreSort Pro with CASS option). I will purchase this program after beginning of 1996. Will practice with the program prior to arriving in Seattle in Jul. 96. Expect to be proficient in the use of the program by the time the business is operational.
Data base management. Have necessary skills now to build a database, conduct necessary merge/purge, queries and reports. Will use either Access 2.0 or Foxpro 2.6 as database program (or the Windows 95 variants once they are released and bugs are corrected).
What remains to be done to get the product or service ready for sale? The earliest I could begin the service would be August 1, 1996. I will retire from the Army effective July 1, 1996 and then have to relocate to Seattle. Additionally, I will need to establish local business contacts and contract for business related materials (e.g. business cards, stationary, etc.) Various technical issues will have to be completed also, establishing phone lines, etc. Deliveries of equipment cannot take place until I have moved into our residence (which is expected to be completed by the time we arrive in mid July 96). The most difficult timing issue might be the establishment of yellow page ads for the business. I'll have to coordinate for business phone in Mar/Apr 96 when we come out to WA for home purchase. At that time, I'll have to reserve the phone number and order the yellow page ad(s) so that it will be in the current year's directory. Initial talks with the local phone company says I'll need to order the ad by May 96 to have it listed in the July 96 directory. For dollar estimate, see enclosed spreadsheet, titled "Start Up Costs For Forest Mail Service" (See Exhibit A). Currently I'm using the comfortable amount as my target figure for start up dollars. Some equipment is already on hand (such as laser printer, some office supplies, etc.)
Strengths and Weaknesses
The strengths of the service focus on the increased use (nationwide) of mail for direct marketing efforts. As the USPS continues to revise postal rates for bulk mailing and the Domestic Mail Manual procedures remains complex, these factors increase the reliance of small businesses to look for a mailing list service if they choose to spend their advertising dollars on mailing list and direct marketing efforts. In order to use mail for marketing efforts and capitalize on postal discounts the business person needs to master the bulk mail regulations or have someone else to it for them. Future pricing initiatives by the USPS are rewarding the mailer that incorporates bar coding with Zip+4. To achieve these price reductions, software specifically designed to do this is required. My service will have the necessary hardware and software to achieve the lowest possible rates. Additionally, use of computers and databases for data searches or queries to target the marketing effort requires the business owner to master the necessary programs. Some business owners are doing this, but for others they are short the time and are looking for someone else to take care of that need. Even with the rise of the Internet, the foreseeable future still holds that the USPS will continue delivering mail at increasing volumes.
What features of your product or service may put it at some disadvantage in the market place? For the small town business person, use of direct mail and mailing list services is not typically used. A significant number of businesses may not be very familiar with use of the mailing list services or direct marketing (as evidenced by lack of any established mailing list services in the region). An additional problem would be for some businesses who may rely on only a relatively small number of clientele (less than 200). In order to qualify for postal discounts, a business would need to send a minimum of 200 pieces in their mailing (10 pieces per zip code) for First Class PreSort or 500 pieces for Third Class Bulk. Consequently, they would not only have to have a sufficient profit margin to warrant using direct mail, but they would also need to target a large enough population of present and potential customers to meet the USPS minimum amounts for postal discounts.
Are there possibilities of rapid obsolescence because of technical and manufacturing developments, style changes, marketing fads, or other reasons? For the next five years, I would not rate this as likely. Even with the rise of computer communications via e-mail and the Internet, the USPS mail volume continues to climb. 1995 use is up over 3.3% as compared to the previous year. Also the increase of direct mail and firms supporting direct mail efforts indicates that the public is responding to direct mail to make their shopping decisions.
Total Market Size and Trends
A data search of businesses located in Seattle and in surrounding areas identified approximately 1100 businesses that would be potential customers for Forest Mail Service. The database was extracted from 1st Qtr Edition of Select Phone Telephone Directory. This is an extract of Yellow Page listings from area phone books. The information was current as of early 1994. In all reality, there has been some changes to the specific businesses, but based on growth figures from the Chamber of Commerce, the baseline population of businesses should remain constant or in all probability increase since 1994. This 1100 market size covers all varieties of business, some with greater probability of need for the mailing services than others. The data extraction was conducted by myself. The current accuracy of data information is approximately 80-90% correct. I've derived that figure based on the data being one year old data with 10-15% of the existing businesses going out of business or moving within the last year. Additionally, there are some businesses that are now present in the area that were not listed in this data base (either because of new start ups or because they have chosen not to have a Yellow Page listing).
Assessment of the Competition
Are there several kinds of products or services that compete for the same business with the same customer? The number of local competitors in the area appear to be very limited. In the local Seattle Yellow Pages, the only advertised mailing list services is the Listings, 100 N. 94 Ave. Omaha NE 68129. Conversations with several businesses identified AAA Printers Inc., 30 W Marina Dr., Seattle WA, as a local business that does mailing list services, but AAA doesn't advertise in the Yellow Pages or in any local media. The only other mailing list service organization is Linden Mailing Service, 101 Westlane Wenatchee WA. Their add in the Wenatchee Yellow Pages states they have been serving customers for 12 years. Lastly, a potential competitor is the United States Post Service.
List your major competitors in order of their reputed share of the market. Comment as to who is the pricing leader, quality leader, most innovative, growing most rapidly, most aggressive, having problems, etc.
|AAA Printers, Inc. 80 West Marina Dr.Seattle, WA||No advertising, word of mouth, several comments said they were very expensive.|
|Linden Mailing Service 101Westlane Wenatchee. WA||Prices very similar to my pricing structure. They charge for permit use ($10), my use is free.|
|Listings 100 N. 94th Ave.Omaha, NE 68129||$75 M company, provides 4K+ lists, provides mailing labels, prospect lists, sales leads cards, data on disk or on line retrieval. 'National focus|
|United States Postal Service, Washington, DC||New proposal by USPS. Still in test stages, no expectation when service would be available nationwide—if ever. Strong opposition by national mailers.|
|Unknown parties who had voiced interest in starting service to Moses Lake Chamber of Commerce||Unknown, haven't entered the business to date as far as anyone knows|
Dun and Bradstreet reports are unavailable for all three companies. There should be one on American Business Lists, but a search on CompuServe did not produce a match for a report.
What is the profitability as a percent of sales of the competition, and what is their profit trend in recent years? At present, this information is unknown.
What information do you have on your competitors' operations?
AAA Printers, Inc. Mailing list services is an off shoot of their main printing business. Company doesn't perform mailing services unless they are included as a part of a printing job. Only will quote based on combined work order. They don't advertise their mailing services, but work word of mouth. Several businesses stated AAA seemed to be very pricey. They were too expensive for one firm to even consider when that owner did want to conduct direct marketing.
Linden Mailing Service. Their pricing structure is very similar to mine. Didn't state whether they have a combined service rate or not. Use of permit is a charged fee, my usage is free to customer. Doesn't appear to be marketing in the Seattle area. Their services appear to be very similar to that I'm proposing for Forest Mail Service. Some businesses I spoke with would not use them because they aren't local and these owners won't deal with anyone unless they are local services.
Listings. National mailing list services bureau. Business compiles lists from variety of sources and then sells or rents the lists. Does have a refund policy for undeliverable mail. They will refund 5 cents per piece. If undeliverable mail exceeds 8%, the company will refund 30 cents per piece over 8%. Doesn't perform lettershop operations, nor does it work with firms and compile their existing lists. Also doesn't support merge/purge services for firms that have a list and want to rent/buy a list of merge with their list for a mailing. They do provide lists on magnetic media. List rentals vary by list, but industry rental rates are $50-75/M depending on the additional needs of the requester (e.g. gummed label, other data elements, etc.).
Northern Mailings. The firm is located in Omaha, NE. The services are primarily mailing list services and data input. His high volume rates (> 1000 addresses) are less expensive than my rates. His rate for printing labels is $.03 per label (compared to my rate at $.04 per label) unless the data isn't maintained by Northern, then he will charge. 10 per label to print them. The impression I have is his business has more volume than I could reasonably expect in Seattle. Additionally, he is one of 4-6 local mailing list services in the Omaha area along with all national mailing list services that advertise in the Omaha Yellow Pages.
United States Postal Service. The USPS intends to test market (in four locations in the United States) a proposal to provide a discount mailing rate for small business owners. The business owner would be able to send out a minimum of 200 mail pieces without requiring any address on the envelope (but the owner must send them to all businesses or deliverable addresses in the targeted area.) While a pricing structure hasn't been released, some analysts have indicated the mailing rate per piece may be as little as 11-13 cents per piece (much less than bulk mailing rates).
a. What makes you think it will be possible to compete successfully with them? What are their weaknesses? None of these businesses are committed to supporting the small business owner in the Seattle area. While AAA is located in Seattle, their limited operations in mailing services coupled with their high pricing structure don't pose a significant threat. The lack of local representation and limited services minimizes the impact of Listings. Lindens's lack of marketing efforts in the region restricts their penetration into the Seattle market. As long as I can price my services below AAA and provide quality service, I can capture the market in the Seattle area. The United States Post Office's proposal has some weaknesses in that it doesn't allow the business owner to target his mailings. It is an all or none proposition. For the mailer who wants to focus on a specific market segment, this program would have him mailing out materials to people who would be unlikely to accept his offer. Figuring a minimum of 40-50 cents per mail out piece, the savings from lower postal rates are soon negated by mailing out pieces with no expectation of a response. If the mailer wants to target his own customer base then this program would not be cost effective and the business owner would need to use another method of sending out presort or bulk mail.
What will make it difficult to compete with them? What are their strengths? A A A is established and has built in printing services for a customer who wants the company to provide not just mailing services, but to also handle the mailing piece design and printing. While their more expensive prices may shy away some customers, the convenience of one stop shopping is worth something. Forest Mail Service will need to enter into a referral partnership with a local (or several local) printers to provide the graphic design and printing for those customers that want a printing support option and don't want to have to do the work themselves. I can't compete with Listings on compiling lists for the vast majority of lists. However, I can create some locally compiled lists (new property owners, newly and existing registered voters, new businesses, etc.) that may have a market with local businesses. In order to compete with the United States Post Service, I'd need to explain the total costs of the mailing campaign to the business owner and show them how the USPS is costing them money or saving them money in the long run.
What is the price spread among your competitors for services that would compete with yours? Stated above, also see enclosed price listing (See Exhibit B) for basic services.
Do you think you can be price competitive and make a profit? Why? Based on my forecast of expenses, along with market potential in the area, I do believe I can remain below the costs of AAA and still make a profit.
What is your first estimate of your:
|Product/Service Selling Price:||See enclosed price sheet.|
|Overhead Cost - G & A:||$570 (See Exhibit 4 for detailed breakdown)|
|Profitability as % of Sales:||22% (Includes owner salary, but doesn't include capital improvements.)|
What marketing and promotion channels are used by your competitors to distribute their services? The only method I've come across is the Yellow Pages for Listings and Linden Mailing Services, and word of mouth/networking for AA A. I'm unaware of any efforts to use direct mail or cold calling (telemarketing) to promote their services.
Preliminary Estimate of Market Share and Sales;
Based upon your evaluation of the market, the competition, and apparent sales trends, make a preliminary, approximate estimate of the share of the market you feel you can obtain in each of the next five years.
|Estimated Total Market,$ (1)||$100,000||$105,000||$110,000||$115,000||$120,000|
|Your Estimated Market Share, %||3.7||28||30||40||45|
|Your Estimated Sales, $'s||$3,700||$29,000||$33,000||$46,000||$54,000|
- Total Market derived from determination that the local businesses would spend at least $1000 annually for mailing list services. Total market in region is more than 1100 businesses of all kinds. Estimating 10% of the businesses would participate in direct mail and mailing list services. Also estimate 5% annual growth in total market based on 5% growth of the region through the year 2000.
What sort of service and warranty must you offer with your product/service?
The following items would be offered as special service incentives for customers: a) Free pickup and delivery in the region, b) No charge to customers that are using bulk mailing and desire to use my postal permit, c) Free consultation and cost benefits analysis for their business and applicability for using mailing list services and direct mail/marketing, d) Free archive back-up of their mailing data kept at my site in case of their data becoming corrupt or damaged, e) Customer satisfaction on the finished product (mailing list creation, CASS certification of data, duplicate removal, etc.) or their money back, f) Mailing data tracking and statistical analysis assistance on all mailings prepared and sent out. g) Total confidentiality of all data, h) Integrity and professionalism at ail times.
What type of packaging is needed either for protection or for point of sale promotion? All PreSort and bulk mail will be protected from the elements to minimize any water damage and increased weight due to mailing pieces absorbing water. Mail will be kept indoors until time of mailing and then will be transported in a vehicle to the bulk mail postal clerk in Seattle, WA.
What methods do you plan to use to distribute your product or service? Will you use direct selling, sales reps, distributors? How will you "recruit" them? I will use a combination of telemarketing for high potential sales leads with regular use of direct mail post cards and brochures/newsletters.
How will you bring your product or service to the attention of potential customers? Customers for mail list services include both new and established small businesses. Some of these businesses operate with no computers (identified by hand addressed mailings), while there are other businesses or organizations that have the need to advertise but don't have the personnel or time to do the mailing list management and direct marketing.
My marketing plan will be built around the following campaign strategies:
Yellow Page Advertisements: I will place an ad in the yellow page directories that service Seattle & the surrounding areas that would focus on the following services for Forest Mail Service: free pick up and delivery, accuracy, promptness, service, speed, mail permit, total service, letter shop, free consultation available.
My direct marketing plan will be a two prong approach:
- I would target businesses in Seattle and the surrounding areas by using post card (folded over) mailers that incorporate my phone number, similar information as in my yellow page ad and I'd mail it using first class presort with address correction (initial mailing to get name out and focus on service in area). My goal would be to target specific industries in region based on created mailing list from ProPhone CD; estimate of approx. 1500 post cards at. 15 mailing cost per card, plus printing cost, approx. $325 to $425 for initial mailing. I would follow up with this mailing approximately every quarter with similar post cards pointing out advantages to tracking a business's existing customer base, mailing list services and time and money savings, etc.
- My other primary strategy is to make telephone contact with high potential business: I will explain the purpose of my business and strive to set up a free consultation with the business to examine their customer tracking systems and their business's suitability for direct marketing. The objective of the consultation would be a follow up visit with price quotes for data entry, maintenance and preparation of a direct marketing mailing.
1 Whether initial customer contact is made by phone or by direct mail response, I want to ensure I explain the advantages of my service, stressing these three key things: (1) Why should the customer let me manage the mailing? (2) Why should the customer start direct mailing? (3) Why should the customer let Forest Mail Service handle their mailings?
In answering these questions for the client, my answers will target the owner's business concerns and how he/she can use my mailing list service or direct marketing. I will analyze their business objectives and show them how my mailing service will benefit them. Included in this analysis: (1) How I will take care of the processing of their mail with the USPS including sorting, postal discounts, postal permits, and the need to stay on top of the USPS mailing regulations. (2) Maintenance of their mailing list and production of mailing labels and other reports thus allowing them time to manage their business. If one of their employees is doing this, my service would allow that person to focus on other aspects of the business and have more time to serve their own customers. (3) I would be able to verify their mailing addresses and ensure that they meet postal standards and incorporate barcoding into the address. (4) CASS certify and check their mailing list and cull out undeliverable names. This reduces their costs both in postage and in materials that never gets into the hands of their customer. (5) I would also be able to provide a design service in conjunction with a local print shop. This would allow the business owner to not only have the mailing list management handled by my firm, but also allow for a total direct marketing effort to be created in support of their advertising objectives. (6) Additionally, I'd see if the company is tracking customers and determine what they are doing with that information. If they are doing nothing, then I can help them get their data under control and incorporate it into a marketing plan for their business. This service would allow the owner to foster targeted direct marketing and allow him to provide directed offers to those 20% who provide him with 80% of his sales.
My bottom line is to focus on What's in it for the Customer!
A business's key advantages to using my service are: a) Save time on preparing and maintaining customer lists. I do the data entry, file manipulation, data base maintenance, publish customer listing based on owners report format, and safeguard the information, b) Save postage costs on their direct mail by using my bulk permit, my computer programs to verify, address, sort the mailing in carrier sequence for delivery to the USPS, and metering. The costs to use my service are less than the business trying to get the information out of a phone book or running the service themselves—Especially in terms of cost of time, equipment, training, software, permits, etc. c) Frees up the business to devote their time to their business and not learn how the post office is changing their mailing regulations, d) I can provide them access to thousands of lists that the customer can rent/buy for their use in targeting their marketing efforts. Also I can help them create their own lists from their existing customer base. e) I will offer free pick up and delivery (Seattle area). f) Free consultation on how to improve and/or use direct mail in their marketing efforts. g) I will show the customer what the costs of using direct mail are and how they can calculate their break even point in terms of gross sales to pay for the direct mailing effort. h) My integrity and professionalism as demonstrated by over twenty years of service to the US Army, h) Lastly, I'd provide a money back guarantee on the service aspect of my business. The guarantee wouldn't cover return rates on mail outs, but I'd have a broader guarantee that if the business owner was unsatisfied with my service, T drefund the cost of all services provided (I'd not refund the cost of postage, materials, etc.)
Another key aspect of marketing to the Seattle area merchants will be to provide education to the business owners. I would educate the local business leaders by providing short (10-15 minute) presentations to the local Chambers of Commerce outlining what mailing list services are and how they can be used for cost effective direct marketing. In educating the client on why they need mailing services, I'd show them the advantages of maintaining a customer database for direct marketing efforts. One example I could use would show how a clothing store owner could track their customer preferences and sizes. They then could use that information to send direct marketing information to the customer, informing them about any special sales/offers that match their personal preferences. A variation of the seminar would be to present an hour to hour and half seminar explaining the use of mailing list services, what they can do and how a customer can focus direct marketing techniques on their advertising efforts. I'd also include how a direct mail effort is tracked to make sure it is effective and what are reasonable expectations for a direct marketing campaign.
In the first three months (Aug-Oct 96), I will target the following customers as ones who may have an immediate need for mailing list services and/or direct marketing assistance:
- All candidates for elected office in Seattle and nearby cities.
- Target restaurants who do weekly drawings for lunches, etc. Establish mailing list for specials, birthday clubs, etc.
- If there are any catalog mailers in the region, target them in the fall.
As special enhancements to my mailing list services, these following services would be available:
- Ability to customize labels—include logo on mailing labels or special information.
- Merge documents/letters for customers and also do special envelopes.
- Offer clear labels or colored labels for special effect.
- Advise customers about address correction and update of database with returned mail.
Networking will also be key. I will join as a minimum the Seattle and other Chambers of Commerce to take advantage of networking opportunities that their monthly meetings will offer. Additionally, I will look at serving with one of the local civic organizations (Kiwanis, Lions, etc.) I will attempt to meet with business clients for breakfast or lunch and discuss their current concerns and interests. Finally, I will provide assistance to the local Red Cross office for Grant County and help with disaster relief efforts and planning (utilizing my previous Red Cross experience and military logistics background).
i) The final piece of my marketing effort will be to send my current customers and strong potential customers a quarterly newsletter that will focus on mailing tips, news about postal regulations and change, how to take advantage of their internal mailing list information and customer data, etc. The newsletter would replace the post card mailings once I've established an initial customer base. The newsletter would then serve as a reminder to the business about my service and reinforce the need for future repeat business.
5. What pricing and discount structure do you envision? My pricing structure is a tiered approach allowing for quantity discounts. See enclosed Forest Mail Service Price List (Exhibit B).
PRODUCTION AND OPERATION
What do you anticipate will be the major difficulties (equipment, labor skills, special operations, suppliers, etc.) in the manufacture of the product or delivery of the service? The two principal areas of concern for my business are the initial set up of the business and my learning curve in mastering the internal aspects of the business.
Initial Set-up. Ordering, delivery, and set-up of all equipment and support materials will be a difficult operation. Due to my retirement from the Army on June 30, 1996, becoming operational by August 1, 1996 will require intensive tracking and coordination to get all of the necessary supplies and equipment to arrive at my office in time for me to begin setup. During the preceding months I will need to be able to determine the order ship time for the various supplies and equipment and then order the materials at the requisite date so the necessary materials arrive near July 15, 1996. This will allow me time to establish my residence and prepare to begin set-up of the business.
Learning Curve. There are three principal areas that I will need to focus on: the mailing software, USPS regulations and procedures, and lettershop equipment. All three areas can be studied and mastered during the time between now and when I retire. The mailing software will be ordered after the first of the year and I will then practice and gain proficiency with the software prior to my arrival in the Seattle area. The USPS regulations can be studied by getting a copy of the Domestic Mailing Manual and taking some USPS training seminars that are offered at Syracuse NY between now and my retirement date. I will also do some follow-up training with the bulk mail clerk and Postal Council in the Seattle area. Lastly, my familiarity with lettershop equipment will have to be accomplished by having a local New York business allow me to get exposure to the equipment and gain the necessary proficiency prior to my retirement.
Why do you think you can manufacture the product or deliver the service at competitive cost levels?
My overhead is much lower than other similar businesses. My business will be a small home office set up. My office space will be deductible and my rent for it is wrapped up in my home payment. The same applies to my utility bills. I will be the sole proprietor and employee in the business. Consequently my wages will be limited to paying myself. Additionally, my supplies and consumables are relatively inexpensive performing this service. Most of my supplies are standard office supplies used in the daily office administration chores. Mailing labels and printer ribbons are the principal consummables in the performance of producing my mailing labels for the customer. To keep these costs down, I'll order sufficient quantities of consummables via mail order from discount office supply stores or check with local dealers and see if they will provide similar discounts.
The majority of costs in the data input or mailing label delivery is time costs and setup of the computer program to produce the output or accept the input. As my business grows and I begin to gain repeat customers, my setup time will decrease because the unique requirements for that business will have already been met during the previous job(s). Also, once the setup has been accomplished, the greater volume contracted for, the higher the profit margin. Based on my competitor survey, my pricing structure is in line with their pricing structure. Also, based on my estimate of costs and production requirements I am confident I can achieve the necessary level of sales to remain a viable business. Using the information gathered from a very limited market survey, there appeared to be sufficient interest in the area for the business to become established. As a fall back, during my start up period, I am not totally dependent on the business for my personal income. Due to my military retirement, my essential needs are covered for myself and my family. Therefore, I can forego my own paycheck from the business, if necessary, until the business has enough sales to begin paying my salary. I am expecting to be able to begin paying myself after 4-6 months in the business.
Give the name and principal skill (finance, manufacturing, engineering, marketing, general management) of both the lead entrepreneur and co-founders.
|Harry N. Neilson-Lead Entrepreneur, Owner||General Management and Service Production|
Why have you chosen the proposed venture? What experience has each of you had which gives you a knowledge of the venture's markets and technology and qualifies you to start such a business?
I chose this particular business because it uses personal skills that I possess. My knowledge and skills with computers and database management programs are very necessary. Also, assisting customers in conducting their bulk mailing and tracking the results of the mailing requires knowledge of statistical processes and set up a tracking system(s). Through personal study and many years of supervisory management where I have monitored organizations conducting both supply and service functions, I have gained the necessary personal and managerial skills to accomplish these skills. Secondly, my familiarity with government regulations and procedures will help me in dealing with the USPS personnel and their regulations. Additionally, my last five years in the Army have been in charge of organizations that are primarily focused on providing a logistical service to their customers. Throughout this time period, I have developed the necessary skills and attitudes to gauge my accomplishment in meeting the needs of my customers and how to make adjustments in my service procedures to refine my support and services. Lastly, I have spent the last two years studying the mailing list service business and have been conducting my own research to prepare for opening the business. Through that study, I have taught myself the necessary background information to begin the business. I have a proven history in entering a field and mastering the necessary skills to meet my customer's needs. I am confident of my abilities to be able to accomplish that again in starting Forest Mail Service.
As the development of the venture proceeds, it will be necessary to develop a balanced and experienced management team. If such a team does not now exist, how will you develop one? That will not be necessary in the first five years. My business goal is to achieve an acceptable sales level that will generate a personal income of approximately $24,000-36,000 per year. Based on my initial marketing information, I believe the limit of the local market will restrict any greater profits than this range (unless there is a dramatic growth rate in the local economy.) As long as I do not attempt to expand the scope of the business beyond my current estimates, I should be able to manage and run the business without requiring any outside support or help from other managers.
How much initial capital will be required to start up the company?Indicate amounts for:
|Range of Funds|
|Plant and Equipment||$9823.37|
|One-time Licensing Fees||220|
|Complete Development of Service||N/A|
|Market Research and Sales Planning||N/A|
|(included in monthly expenses)|
|Other Organizational Expense||682.68|
|Additional cash for monthly expenses||6500|
These funds will last 8-9 months.
How much additional capital will be required until your venture can support itself? This estimate should consider such items as: increases in manpower, working capital requirements, etc.
|First Estimate - Capital Requirements|
|Year||Range of Funds|
|Total Capital Required||$4000|
Indicate who prepared the preceding data:
Name: Harry N. Neilson Phone: (509) 321-5485
Name any financial or business who may have been consulted:
None at the present, do plan on discussing with a couple of banks in Seattle Spring 1996.
Can any of this capital be obtained from bank loans (secured by fixed assets, receivable, inventory, etc.)? If so, give a rough estimate of this loan amount. $17,000 secured by personal assets (mutual funds) owned by Harry N. Neilson.
MAJOR RISKS AND PROBLEMS
- What are the major risks and problems that you see in the proposed business? List them in order of importance. Consider things like: reliability of market and sales projections; ability to manufacture at competitive cost levels; availability of trained labor; ability of competitors to underprice or make your product obsolete; ability to get the product exposed and sold, etc.
- Market area may not be of sufficient size to support projected sales.
- Projected expenses may be too low and marketing efforts may require greater cash flow to achieve penetration into market place.
- Increased penetration of computers and databases into the business place may make it easier for owners to establish their own mailing lists and manage their mailings using in house personnel.
- Injury or illness to myself which will not allow me to operate the business.
- Expansion of the Internet and reduction of mailed literature with increase of electronic literature.
- What could you do to minimize the four most serious risks?
- Market area may not be of sufficient size to support projected sales. If the market area proves to be too small to develop sufficient sales for the mailing service, I will have to expand the service into other areas in Central Washington. By expanding the service, my variable expenses will go up directly due to increased long distance charges, travel costs, and mailing (overnight and parcel). If such is the case, than the volume of the increased area will have to make up the increase. I won't be able to increase the prices of the service due to Linden Mailing Service, located in Wenatchee WA, which has very similar pricing structure. The second option would be to focus exclusively on the mailing list management aspect and begin targeting customers in other urban areas in Washington State (Spokane, etc.). This service doesn't require as great as much travel to deliver the product to the customer (data and mailing labels, etc.) consequently I could use UPS or FEDEX to provide overnight deliver of the data product. Lastly, if this proved unsuccessful, then I could branch out into other home businesses and merge two part time businesses into one full time business (examples would be: performing a computer data back up service to companies with data stored on their computers, event and meeting planner, inventory control services, computer instruction on software packages, part time instructor at community colleges, etc.)
- Projected expenses may be too low and marketing efforts may require greater cash flow to achieve penetration into market place. Based on projected cash for expenses, if my marketing budget is inadequate for the proposed marketing plan, then I will have to expand in other marketing areas that require less money but may require more time (both cold calling and net working). Recognizing this may occur, it will be critical for me to track my cash flow from day one and also make forecasts of my available cash for the initial six-nine month period. It will take at least a quarter to establish some base line, but based on those figures, I will then have to evaluate the entire marketing plan against my cash flow and make sure it is still reasonable. If the marketing costs using direct mail are not achieving results due to insufficient penetration and volume, then I will have to spend more time on the phone talking to potential customers. Additionally, I will continue to network to increase awareness of the service. Lastly, conducting free seminars for business leaders and showing them how mailing services can increase their sales by focusing their marketing efforts on their existing customers should help by increasing my sales. I will either volunteer to different organizations to give these presentations, or be forced to pay the necessary rental fees for meeting rooms to carry out this aspect of the plan.
- Increased penetration of computers and databases into the business place may make it easier for owners to establish their own mailing lists and manage their mailings using in house personnel. In the event that some businesses say they can't afford the service because they say they can do it cheaper in house, I will show them their incidental and hidden costs in managing their own lists and mailing their letters are higher than what I can do it for them. In making this argument, several conditions do need to exist: 1) The owner is using direct mail or will be working with a mailing list in some database format. 2) Owner must agree that time is money. 3) The amount of time he would spend to have himself keep up with postal regulations, software changes for both data management and postal certification, and time spend performing data entry and maintenance is not effective for the mail volume that most businesses in the region would have. Businesses who manage over 10,000 names can justify doing the work in house, but they also may be agreeable to outsourcing this work to Forest Mail Service.
- Injury or illness to myself which will not allow me to operate the business. Because this business is a sole proprietor business with no employees other than myself, if I were to become ill or injured for more than a short period of time, the business could quickly suffer disastrous consequences. For the foreseeable future there would not be anyone else I could rely on to run the business until I recovered. Obviously the immediate impact of such a scenario would be loss of any positive cash flow the business had. Depending on the amount of loans and other liabilities in place, the negative cash flow could range from major to relatively minor. Besides the inability to pay off any liabilities, I would not be generating any income for myself. To counter this scenario, the most prudent course of action would be to secure a personal health insurance policy that would cover my income that would be lost due to the illness or injury. Because of my military retirement, my immediate cash requirements for my family and lodging will be met my that income. However, that income will not be sufficient to cover my liabilities in the business. Therefore the health insurance would come into play. This requirement could be lessened by liquidating some of my mutual funds to pay off the balance of any liabilities if necessary.
- How would you rate the overall risk of the venture—high, medium, or low?
I would rate the overall risk of the venture between medium and low. I feel the low side is relevant due to the positive reaction I had from the initial market survey that there is a need in the region for mailing list services. The true test will be whether those same individuals are willing to pay a reasonable price for the service as offered. In order to convince them, I'll need to be able to show them that with a certain expected mailing list response results, they can expect a reasonable profit margin on these sales. Using those variables, I will assist them in determining whether the service will be cost effective for them or not. The medium risk is based on the minimum size for a service of this nature in the Seattle area. Consequently, I'll need to capture the market as much as I can.
Start Up Costs
|Items/Supplies||Unit Cost||Survival Qty||Comfortable Qty||Ideal Qty||Survival Cost||Comfortable Cost||Ideal Cost|
|(inserts to mechanical pencils)|
|Dry Erase Board and Pen||50||0||1||1||0||50||50|
|Various Self-Inking Stamps||3.5||5||10||10||17.5||35||35|
|(4 ea. per bundle)|