III. The Market
3.3 SWOT Analysis
- Excelent customer service - Six years of experience
- Different packages for customers - Good culture and working
environment.
- Low price
- Outstanding management team
WEAKNESSES
- Difficulties to build trust among users
- Low entry barrier - Difference market
OPPORTUNITIES
- Financial crisis
- Low purchasing power rent - Niche target market
THREATS
- Competitor intention of getting into the niche we are targgeting
- Loss of key staff
- Lack of budget if the business does
not get profitable in the early stage
3.4 Porter’s Five Forces of Competitive Position‧
As mentioned before, in this business proposal we are targeting two groups: a) the owners of rooms/apartments and, b) real estate agents. Indirect customers would be the tenants because if we could not get people interested in the offers posted on the website, then we will not have business and owners or agents would be not willing to pay for our service.
As it will be explained in the forecast, we will charge a certain percentage as commission to the owners/agents when they list their offers. It will vary depending on which package they choose. On average we will charge 1.5% once they input the monthly rent they expect to be paid by renters. For instance if they say they want to charge €1,000 per month we will charge €15. This fee will include the option of have their offer listed for two weeks and they will be notified via email of the customers interested in renting their room/apartment.
This will apply for owners and for agents.
Nevertheless, agents will have the option to become a member of our website paying a monthly fee of €15. If they become members they will have the advantage that they will be able to list as many offers as they want as long as they want.
People interested in renting apartments/rooms will be able to use our platform as a source of possible rooms/apartments to rent without any charge in the service, a vast variety of options but most important a very safe way to find what they are looking for in a friendly user platform.
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Our distribution channel will be Google AdWords. We don’t need a minimum budget to use it. We can spend as little or as much on Google AdWords.
We also will pay a Search Engine Optimization firm to help us rankTop, the Search Engine Optimization (SEO)(netmark.com)(highervisibility.com) specialists gets its clients on page 1 on Google, Yahoo, Ninemsn, using White-hat methods (White-White-hat methods are generally approved by the search engines and tend to produce results that last a long time; whereas Black-hat SEO uses tactics that is against the search engines' terms of service such as spamming the search engines; attempt to redirect search results to particular target pages)9
With the two mentioned means we will reach the segments of the market we are targeting and it will be easier for them to find us. We will also control how many hits per day and per week we get to transform that into sales.
and keep them rank top by monitoring and maintaining Search Engine Optimization on a monthly base.
3.7 Supply
Due to the nature of the business it only requires a proper maintenance of the website. One of the members of the management team is already in charge of this maintenance but in the future, after our plans of expansion, we will have to hire a full-time programmer to be in charge of this matter.
Hiring a programmer does not represent any constraint on our ability to maintain the website because currently we can do it by ourselves.
9 http://www.ozwebs.com.au/blog/Spamming+the+search+engine (12/03/2012)
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Our customers are divided in two groups: a) Owners of rooms or apartments;
and, b) real estate agents. Each group have a different treatment in the website because the agents have more frequent postings on a website like this, so they cannot get the same benefits.
3.8 Competitors:
Currently, there are some competitors in the market and I will briefly explain what the main competitors offer:
Apparently, they don’t target any specific group because their apartments are very diversified and the price varies a lot.
Table 3: Competitors Comparison
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Our competitive advantage will be based on the following:
User-friendly website: The website will be very straight forward, it immediately shows the list of all the rental offers but at the same tame shows the option to go to the agent or owner area. It does not have many options so we make it easy for the user to interact with the platform.
Customer oriented service: Since we create the website very user-friendly, we show that we care about our customers. Immediately after their registration in the website we will contact them to ask them if they have any inquiry or if we can help them in any form. Although the website is very easy to use, some customers might have struggles to use it, in that case we will be glad to offer assistance them on how to use it to get the best from it.
Good customer service: In the middle term we will have available a person assigned specifically to chat with our customers so we can offer instant response to them. The chat will be available 24/7 and they can contact us whenever they need. Also, we can detect from our server when the person is in our website for more that a certain amount of time and we can ask him/her if he needs any help or assistance. Moreover, in the case of agents we will send them periodically emails giving them special discounts to post more offers in our platform.
Registration process: Agents and owners have to register but the registration process is very simple and once they are registered they will
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have free access to the options they will have according to the plan they choose.
Employees: Once we start to hire people to work with use we will create such a culture that they will be happy to work with us. We also want to create a great working environment where people feel comfortable working for us as a team. We would also like to offer some training to people interested in joining us and inculcate an entrepreneur spirit so they will come out with good and innovative ideas to make the working place better and better.
We do care about our earnings but most of all we would like to offer a great satisfaction for our customers when they do business with us and also with our employees so the whole atmosphere will be enviable for the rest of the people that are still not part of our community.
3.10 Pricing:
Our pricing strategy is different for the two groups we are targeting.
For owners we will charge 1.5% of the price they are asking for a monthly rent payment. Based on previous experience we already know this percentage is fair and people are willing to pay for it. However, for agents, we know they like this type of service and they will post more offers, thus we will charge them the same percentage as for normal (individual) users but with the option of becoming a members. Becoming a member gives them the opportunity to post as many offers as they want and the fee is €15 per month.
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Table 4: Different Plans For Customers
Average monthly payment in Madrid €8711010 See Appendix 5 for further details
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The concept is fairly simple. In the first stage, we will have to find offers from people offering their apartments or rooms and put their offers in our website. It will be for free but it will also be just to make the website popular. Later on, once people already know about our website they will like to keep using it and it will work by itself.
We will be in charge of replying emails sent by customers and reply to them as soon as possible.
4.1 Differences Benefits we offer:
- An attractive website - Easy and secure payment - Easy signing up process
- Experience on this kind of business - Good reputations
- Safe place to do their business - Friendly user website
- Special offers and discounts
- 100% refund if they cannot rent out their apartment/room after 1 month.
- High quality customer service.
4.2 Processes
The operational processes involved are as follow:
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- Yearly payment of the domain of the website;
- Creation of the website;
- Design of the website;
- Sign in on PayPal and create the payment option via PayPal to offer a secure payment process for clients;
- Make available our website for advertisement (other source income);
- Find existing offer in the market and include them in our website;
- Monitoring the traffic of the website;
- Monthly payment of Google Adwords;
- Daily response of emails sent by customers;
- Permanent analysis of the market Long-term:
- Expansion to other countries (Latin America and Europe) - Analysis of international markets
- Analysis of the feasibility of the implementation of the business model in other countries;
- Establishment of procedures and systems;
- Personnel management;
- Staff training;
- Liaison with lawyers
- Improve the design of the website
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In the first stage of the business we will need to create the website and design it.
Afterwards we will like to buy the McAfee SaaS Endpoint Protection to make sure our website is secure for everybody.
Endpoint Protection Suites unite industry-leading endpoint security and data protection with centralized management. McAfee SMB security solutions block malware and viruses, defend against cybercriminal activity, and safeguard a mobile workforce with comprehensive endpoint protection — both on and off the network.
Moreover we will include the option of a CAPTCHA in our website so we can protect our website against bots by generating and grading tests that humans can pass but current computers programs cannot. For example, humans can read distorted text as the showed below, but current computer programs cannot:11
Figure 2: CAPTCHA
Likewise, we will also implement the reCAPTCHA, which stops spam and help digitize books at the same time! The words shown come directly from old books
11 http://www.captcha.net/ (14/03/2012)
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that are being digitized. In that way we will contribute to make a better world.
Figure 3: reCAPTCHA
4.4 Regulatory control:
Our team has decided to establish the headquarters of our company in Taiwan, in order to do so we will have to fulfill the following requirements:
1. Use the online application (http://onestop.nat.gov.tw) to search the name, apply for incorporation and tax registration, apply for Labor Insurance, National Health Insurance and Pension Plan Report with the Bureau of Labor Insurance and register for work rules with the Council of Labor Affairs
2. Make a company seal
3. Submit a CPA audit report showing that the amount of capital invested is sufficient to cover company establishment cost.12
12 http://www.doingbusiness.org/data/exploreeconomies/taiwan,-china/
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Research shows that the most important factor for investors in evaluating a proposal is the management team.
‘A good management team can ‘make it’ in a poor market or a declining industry but a weak team won’t survive even in a boom market’ (Venture capitalist).
David Vega, Attorney at Law, IMBA candidate (2012) Spanish Speaking Markets Manager (aged 31)
Cofounder of this project, having been a Legal Manager of Deloitte (Guatemala) for two years. He was one of the three Legal Managers of Deloitte responsible to generate business in the Tax and Legal department. Previous experience includes six years working in the legal field.
Sebastian Ang, Information Technology Engineer, IMBA candidate (2012) Singapore and Europe Manager (aged 32)
Cofounder of this project, having been a full-time development lead at roomsDB.net Pte, Ltd. Singapore. He was in charge of the Development of PHP/HTML code, Development of relational database structure and SQL queries, Integration of E-Commerce payment systems, Integration of Ajax based web services, JavaScript programming, API programming, CSS development and Server deployment.
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Albert Iglesias Nabau, BSc Business Administration, specialization in Finance, IMBA candidate (2012) Controller (aged 30)
He was in charge of leading and coaching teams between 2 and 6 people in several ad hoc audits in multinational companies in retail, pharma and industrial products industries. Reporting in IFRS, US GAAPs, New Spanish GAAPs.
Performing consolidated audit procedures, SOX compliance, internal control assessments, and Due Diligence analysis.
Figure 4: Organizational Structure
In the first stage of the business implementation Sebastian and David will be in charge of everything. Both of us will be in charge of hiring people. The only difference will be that in my case I will support Spanish-speaking (in the
Latin America
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medium-term also Portuguese speaking) customers and Sebastian will be in charge of English and German Speaking customers.
We are two persons with strong principles and very goal-oriented. We want to implement and apply all the knowledge acquired during our studies for our Master’s degree and specifically we want to create a different company that cares more about people.
The current structure of the organization shows that we have expansion plans and we would like to get to know the people we are going to hire before hiring them. We will apply the same concept we applied for us. First we became friends and after realizing that we can work together in good terms with a constant feedback of our behavior we decided to work together. We would like to create a great culture in our company where everybody feels happy working and willing to give the best all the time. This feeling will automatically be transmitted to our customers.
Mostly all of the current websites don't care much about their customers or at least they haven’t found the way to make customers feel they are well treated.
We want to change it and create a great relationship among customers and our company.
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5.2 Operation Process:
Figure 5: Business Model: Multi-Sided
5.3 Financial Plan:
5.3.1 Proposal:
Our proposal consists in creating and launching a website for people interested in posting their apartment and rooms offers and generate enough traffic to get enough interested tenants in the offers posted. The website is intended to be very friendly user and at the same time with high quality customer service in order to create a profitable enterprise.
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We want to obtain the 25% of the market share in the industry in Madrid.
The first tree-four months we want to be in the top list of Google search engine to get people to know our website and the services they can get if they join us. If we can keep the name of our website in the top list, people will almost always click on our link and in that way we will create brand awareness (product recognition).
Later on beginning from the 6th month we want be profitable and at the end of the 1st year we will get the 10% of the market share. Turnover in that year is projected to be €3,000.
We estimate that by the end of the third year we would have achieved our goal of 25% of the market share in Madrid. By then the business will achieve show a 100% return on investment by 2014.
The investment required for the first year is €60,000, which includes a contingency of €5,000 to cover the risk of a slower growth than anticipated. The money required for the initial invested is divided in two, so each of the cofounders are giving €15,000 from our own pockets and with some money from our families and the rest we plant to obtain it from angel investors.
This is a growing market and we want to differentiate from other being a great team and having a great culture in our company. We are very hard workers and we are decided to provide our customers with he best experience they have ever had when renting out apartments and rooms.
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5.3.2 Forecast:
We intend to invest on Google Adwords, this is they way how it works:
1. Every time a user enters a search query into Google, all the advertisers that have chosen those keywords are automatically entered in an auction.
2. For every keyword in your AdWords account you assign a maximum bid, which is the amount you are willing to pay per click.
3. In most PPC programs, the algorithm is simple. The higher you set your CTR, the higher you rank on the search results page.
Figure 6: Bidding Example
On AdWords it depends both on your maximum bid and your click through rate.
Rank = Maximum bid x CTR (click trough rate). This is how AdWords rewards for writing relevant ads.
Often we will have to pay less than our maximum bid. The AdWords system automatically calculates de CPC we need to maintain the position of the competitor below us, and charges us only one cent more to display our ad first.
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In our case we will use the option of ‘Automatic Bidding”. Automatic bidding allows us to set a daily budget for each of our campaigns and then AdWords work to bring us the most clicks possible within that budget.
We can even set a CPC bid limit to make sure the system doesn’t bid more than we are willing to spend per keyword.
This is the part when we have to consider the value of a click, how much is a visitor to my website worth and how likely is it that this visitor will turn into a customer?
5.3.2.1 The sales forecast:
It is not possible to detect whether the person clicking on our website through Google AdWords is a potential renter or a potential customer (owner/agent).
Usually in this industry, and because of the Spanish economical situation, people clicking on the website will be potential customers (people looking for a place to post their offers). In that case, we estimate that at least 75% of the clicks will be from potential customers. Since we know that our website is very professional and friendly user, we project that 85% of the potential costumers will be willing to post their offers on our website (85% of 75% = 59.5 of the clicks will be willing to post their offers).
Based on our previous experience, we know that we can start bidding with
€0.15 and we will get the top of the list.
We have an estimated budget of €900/monthly for Google AdWords which means that we will be able to have 333 clicks per day ((€900/30 days)/ €0.15), denoting that we can even pay more per for the bidding, or save the money for other type of advertisement.
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Since the average monthly payment for renting an apartment is €871 and we are charging 1.5% for our services (please refer to Appendix 5)
Table 5: Singapore Revenue A
The following table shows the current situation in Singapore and the revenue generated.
Table 6: Singapore Revenue B
The following table shows the same information as the previous one but adding the members who generally pay a membership.
Table 7: Madrid and Singapore Populations Comparison
This is the comparison of population between Madrid a Singapore and the proportion of customers estimated for Madrid compared to those in Singapore.
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5.3.2.2 Cost Structure
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5.3.2.3 Income Statements until Horizon Worst Case Scenario
Most Likely Scenario
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Best Case Scenario
5.4 The exit
Once we are close to the horizon period, we expect to offer the company by private offering to similar companies. As an established platform, the investment would be considerably increased its value to that time.
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4. http://www.wordstream.com/blog/ws/2010/04/26/good-click-through-rate 5. http://www.marketingterms.com/dictionary/clickthrough_rate/
6. http://almeria.angloinfo.com/countries/spain/re_rental.asp
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VII. Appendix 1
The previous graphic shows one-month statistics based on number of visitors, average visit duration and also the new visits. In one month we had 49,079 visits (average 1,636 visits per day).
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Appendix 2
The graphic above shows the number of visitors in a month based on their location. Most of the customers are from Singapore but as showed in the map, a
The graphic above shows the number of visitors in a month based on their location. Most of the customers are from Singapore but as showed in the map, a