Business Plan

Advertising agency: “PR”.

Group № 3:

Bykovskiy Alexsandr 20110554

Bakirova Danara 20111288
Kazhdarov Yerkebulan 20133389
Nuranova Aidana 20110328
 Table of Contents:

I. Executive Summary………………………………………………………….3

II. Business Description………………………………………………………..4-6

III. Marketing Strategy………………………………………………………...7-10

IV. Competitive analysis……………………………………………………...11-13

V. Development Plan………………………………………………………...14-20

VI. Operations and Management Plan..............................................................21-25

VII. Financial Statements...................................................................................26-28

2
 Executive summary

The purpose of this report is to provide detailed information about our business

idea which is to operate an Advertisement agency “PR”. The report includes all the

needed sections for an actual business plan. Advertising is a form of communication

whose purpose is to inform potential customers about product and services and how to

obtain and use them.

It starts with the business description in order to give a brief idea about the whole

business and the futures of the company. Marketing strategy, competitive analysis and

development plan parts will show what the ways of running the company are and who the

main competitors of the company are. One of most important parts is where all the

benefits of "PR" company in front of competitors are described. Operations and

management plan and financial statements will show the ways for the future growth and

what will be the costs, expenses and revenues earned by the company in future years.

Also, there will be information about the time when all expenses will be fully recovered

and company will finally bring pure income.

The report explains how our idea of creating agency will be achieved in details.

Advertisement will be highly demanded. Many businessmen are facing the problem

regarding the advertisement. Awareness of advertisement is increasing. There are many

businesses in Kazakhstan who lack of advertisement. Our agency will provide them ease

and give support to the businessmen. “PR” fills the gap of poor advertisement by

providing specialized ads for individuals.

3
 Business description

Outdoor advertising’s main aim is to drive sales for goods and services effectively

and with lasting impression to masses. Through an outdoor ad campaign, you are making

your brand message accessible to those potential customers (unqualified prospects) who

move out of their homes (for any purpose). It's all about providing information about

your brand simultaneously attracting the passing-attention of its potential customers.

The first step of any promotion campaign is to design the brand message.

Imagine, you are the customer, how would you expect the advertiser to present the brand

message? In order to attract more people, you should put yourself in the shoes of your

customers and frame the brand message.

The second step is to choose the sources of providing advertising. An advertising

company can be launched through multiple outdoor media. The ways of providing

advertising is setting up billboards, banners on the territory of Almaty city with the

permissions of Akimat (Administrative department of Almaty city) and with the help of

construction company which originally would make installation. It is important to choose

a suitable location to display any outdoor advertisement. The location where the ad is

placed should be easily accessible or viewable by the target audiences. We consider placing

our outdoor ads at roadsides, traffic points, buses, airports, metro stations, shopping malls.

Outdoor Advertising interest has continued to grow year by year. It has the

numerous benefits in providing services to different companies. Some of these benefits

include:

· It provides numerous ways to market a product effectively, thus, giving back value for

every dollar spent.

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· It is an extremely effective way to reach the target market.

· It is an efficient way to ensure the products presence in consumer’s mind.

· It is a mixture of various forms of media that successfully reach people wherever they

are.

· It provides an effectual way to reach consumers and create an overall awareness of the

product.

Therefore, this kind of business would exist while other companies would create

new goods and services.

In case of our company we would provide advertising though billboard and

banners around Almaty city. We want to set up our billboards in the area of Almaty city.

The main area would be between Tashkentskii-Al’ Farabi and Dostyk-Momishuli streets.

Because of high traffic density on the roads in this area we can predict that making

advertisement on our billboards would be demanded. During the process of creating a

company we would obtain the licenses to establish an individual entrepreneurship

working in advertising sphere, also we would need licenses to setting up banners and

billboards on the streets of Almaty city.

We would need to allocate our work forces by four different departments. They are:

· Financial and accounting department

· Logistic department

· Design department

· Marketing department

At the start-up we decided to divide duties among us. Each of us would take a

head of each department. We are going to buy all necessary equipment and establish

5
the contracts with suppliers who will provide materials to the printing. We would try

to attend a tender organized by other companies and government, in order to find new

customers. However, this is already stable market with a large number of players. The

major competitors in this area are: Almaty Zharnama, Slanet, MGroup and others.

The competitive advantage of the company would be good places around the city and

the cost leadership strategy and differentiation strategy. Possible partners of our

company would be: Almaty Zharnama and LG. The first one would be provider of

legislative power to place advertisement around the city. The second would be

supplier of the newest technologies that would help with our differentiation strategy.

Our target audience would be government (Kazakhstan 2050, Expo 2017, etc.), cell

phone network providers (Tele2, Activ, Altel, etc.), resellers of electronics

(Technodom, Sulpak, etc.). We decided to choose these companies because of

establishing large number of new products and services in short- terms. Therefore,

they are always demanded in large advertising.

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 Market Strategy

The original size of our company at the starting point would be small because of planning

to place three regular banners and one innovational which is not represented in any

country. The internal structure of our company would be differentiated in some division:

· Financial and accounting department

This division is highly connected with logistic and marketing departments. The

primary purpose of any accounting function is that of ongoing financial record

keeping. Operational expenses, salaries, capital expenditures, investments, cash flow,

utilities should be tracked on a monthly basis at a minimum. The ongoing result is the

creation of an organization’s financial history that can be used in a variety of ways, as

it gives managers a snapshot of the firm’s financial status and wealth at any given

time.

· Logistic department

Logistics is considered to be the complete process involving planning, managing and

controlling the flow of goods and services, information, real-time data and human

resources from the point of origin to the point of destination. There is hardly any

manufacturing or marketing activity that can be achieved without the support of an

effective logistical department. They will search for new locations in the Almaty, in

order to future growing of our company. Looking for outsourced activities to be

accomplished on time, establish deadlines.

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 · Design department

The main responsibility of the department would be to create, edit and draw, banners,

logos and slogans (create the content of advertisements). The department also can be

outsourced.

· Marketing department

The main goal of this department is to find clients, follow up markets (demand,

supply, predictions), to conduct survey, distribute questionnaires, conduct exiting

customer interview in order to know the reasons and fix the problems. Also they

should follow competitor’s prices for this purpose they can use ghost customer

strategy.

The growth prospect can be connected with entering Kazakhstan into Eurasian

Customs Union, which is already attracting attention of foreign investors. As they are not

familiar with our mentality they will need a help of local agencies which provide

advertisement and promotion for foreigners. As the result there would be expansion of

advertising market on which we are targeting. Moreover, year by year there is an increase

in the amount of new products, goods and services, which also need ads. It has the direct

influence on the rise of demand.

The main competitor on this market niche is Almaty Zharnama which is

positioning themselves as partly governmental owned company of providing external

advertisement(billboards, advertisement in buses , lifts etc.). Our company has two major

strategies which we believe would provide us high market share. The first is Cost

Leadership. We want to attract more customers by providing lower prices. The second

one is Differentiation. We are planning to create bent LED-monitors with 360 view angle.

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Such kind of system nowadays does not exist. This unique advertisement will attract

more customers because the advertisement and brand management are more important

today than a product itself.

Our company uses two mixture of pricing: Cost-plus pricing and competitive

pricing. The reason is that we have both fixed and variable prices. The fixed prices are

rent of our banners, billboards, rent of office, salaries, overhead, etc. The variable prices

include the size, color, material, logistic expenditures, delivery and installation of

banners. The competitive pricing is similar to our Cost Leadership strategy.

We use direct sales and manufacturer's representative distribution channels. We offer our

service in advertisement field (rent of billboard, Led-monitors, etc.) Manufacturer’s

representative – we are closely connected with printing companies, which are our

suppliers. They provide us with printed banners of our customers and we just add cost for

our company.

Considering promotion plan we will use following strategies:

Advertising – we are going to present our company to prospects by ourselves creating

message.

Public relations – as we are advertising company we need to keep public relations. It is

important to be ethical, in order to avoid distraction of image of our company and

customers.

Sales promotions – we are going to promote our company’s services by using our

billboards on which will be our contact and on Led-monitors will be special time for

advertising ourselves.

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When developing the revenue model for our business plan, we should use the simple

equation which consists of the total number of customers and the average revenue from

each customer. Our prediction of monthly gross revenue consist of "T" represents the

total number of people 23(3+20). Three are classical billboards and 20 is maximum

number of LED-monitor users. "A" 200,000 KZT represents the average revenue per

customer, and "S" represents the sales projection. The equation for projecting sales is:

(T)*(A) = S. Thus, S=23*200,000 = 4,600,000 KZT.

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 Competitive Analysis

The major competitors in this area are Almaty Zharnama and OneTwoThree. To

make a competitive analysis we decide to create profiles of these companies based on

their marketing strategies and their strengths.

Almaty Zharnama is a partly governmental owned company which main field is

advertising on streets. This includes: banner advertising, advertising on buses, bus

stations and streets. The specter of their field is relatively wide; however they are not

represented in media advertising niche. Almaty Zharnama’s main advantage is the

easiness in obtaining licenses and permissions to place advertisements because of partly

governmental structure. Due to such structure they have strong bureaucratic policies

which slow the processes of settlement advertising from non-governmental companies

and individuals. Almaty Zharnama has fixed client base therefore they are not ready for

the new customers and new market players.

OneTwoThree media advertising is a developing young company which is famous

by orienting on Internet advertisement in our country. One of the main activities is using

unusual ads such as conducting online promotional campaigns, contests, polls, quizzes;

virus ad, and etc. This can be simultaneously considered as advantage and disadvantage.

On the one hand, this kind of ad would attract qualified prospects. However there would

have no significant effect on masses (unqualified prospects / suspects) because of narrow

specter of target audients.

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 The strong sides of our business

One of the strong sides of our business is the locations around the city ad two

strategies which are differentiation and cost leadership.

First main strategy is Differentiation. The plan is to create LED-monitors that has

360 degree angle. These system is not used in the borders of Kazakhstan and be a unique

advertisement. That is why it will attract more people as good advertisement nowadays is

more important than the product itself.

Second is Cost Leadership. The plan is to attract more customers with relatively

low prices on advertisement services. This will provide us with high percent of customers

in short time period.

 Overall cost leadership - here the business works hard to achieve the

lowest production and distribution costs so that it can price lower than its

competitors and win a large market share (Texas Instruments)

 Differentiation - here the business concentrates on achieving superior

performance in an important customer benefit area valued by a large part

of the market (service leader, quality leader, style leader, technology

leader)

There are four departments that will create the internal structure of our company,

which are:

· Financial and accounting department

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 · Logistic department

· Design department

· Marketing department

The strength of our business is as following:

Entering of Kazakhstan into the Customs Union with Russia and Belarus. Which

means that foreigners will need help in advertising their products on Kazakhstani market

as they are not familiar with Kazakhstani mentality.

The rising amount of products and services on our market which ensures future

profit and for advertising companies and expansion of advertising business.

Marketing control:

 Annual-plan control

 Profitability control

 Strategic control

This is our main business plan that already works all over the world. It is already checked

by world companies experience and proven its effectiveness.

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 Development Plan

Product Development:

Product development takes place, as under:

1. Creation of an entirely new product or upgrading an existing product by exploring all

possibilities and outcomes.

2. Innovation of a new or an existing product to deliver better and enhanced services to

end-users.

3. Continuous improvement of a new product or enhancing an existing product by giving

preference to satisfy the demand of end-users.

4. Enhancing the utility of a new product or upgrading features of an existing product, for

the personal and/or commercial use, to expand the defined goal (objective).

Product development involves modification of an existing product that satisfies

customer wants. In order to reach this goal, we are going to create bent LED-monitors

with 360 view angle. As it is absolutely new type of providing an advertisement, it will

14
attract more customers because the advertisement and brand management are more

important today than a product itself.

Because of using cost leadership strategy we decided to keep our prices as low as

possible. Our prediction of monthly gross revenue consist of "T" represents the total

number of people 23(3+20). Three are classical billboards and 20 is maximum number of

LED-monitor users. "A" 200,000 KZT represents the average revenue per customer, and

"S" represents the sales projection. The equation for projecting sales is: (T)*(A) = S.

Thus, S=23*200,000 = 4,600,000 KZT. To satisfy our customers we would try to keep

this level of prices even despite inflation.

Organizational Development:

Agency structure

Account Service

The Account Service team works closely with the client to map out their communications

needs and define the role the agency can play in helping meet their business objectives.

They engage agency resources as appropriate and ensure all the work done for the client

is suitable for their business and that projects run smoothly.

On a day-to-day basis, this means creating agency teams to work on specific projects,

communicating the agency opinion in formal points of view, presenting work, and setting

timelines and budgets. Account Service is ultimately responsible for ensuring that all

agency work is effective and projects are completed on time within budget.

There are a number of levels within Account Service. Depending upon the size and

requirements of the agency, common positions (starting from the more senior) are as

follows: Director of Client Services (overall responsibility for the Account Service team),

15
Group Account Director (responsible for a group of accounts, each account headed by an

Account Director), Account Director (may be responsible for more than one account),

Account Manager and Account Executive. All employees are staffed according to its

unique needs.

Creative Services

The creative services group is responsible for making products. Advertising can take

many forms (TV commercials, print ads, and outdoor billboards to name a few), but

collectively they are referred to as "the creative" or "the work." Development of the

creative is divided between a Copywriter (words) and an Art Director (visuals) who work

together to create rough versions of the ads.

Overseeing these teams is the agency Creative Director, who approves all the work before

it is shared with the client. Even though the creative director rarely writes ads himself, he

has a tremendous influence on all the work an agency develops. The Creative Director

helps guide each team, ensuring that the work is unique and appealing while strategically

on target.

Once an idea for a radio or TV commercial is ready to be brought to life, a Producer joins

the team. The Producer coordinates with the outside resources necessary to produce

finished ads — in the case of a TV commercial this can include a large group: a

commercial director and his production company, actors and voiceover artists, film

editors, musicians. The producer estimates the cost to produce the ads, oversees the

writing of contracts, and coordinates the production from start to finish. The Print

Production Manager performs a similar function for print ads, estimating costs, briefing

suppliers and coordinating these jobs from start to finish.

16
Market development:

Media Planning and Buying

The largest portion of a marketer's budget goes towards buying media. This places a huge

responsibility on the media planning and buying department.

Media Planners determine how to best expose the creative message to the desired target.

They determine what combination of TV, radio, magazines, etc., would reach as many

target consumers as possible at the lowest cost. The result of their research and analysis is

the Media Plan.

The Media Plan is formatted similar to a calendar, and lays out when and where the

advertisements will appear. Plan effectiveness can be measured in many ways.

Following are a few of the most important measures:

Reach: what percentage of the target audience will be exposed to the ad

Frequency: how many times the average consumer in the target audience will be exposed

to the ad

Effective Reach: also referred to as '3+ reach,' quantifies the percentage of the target

audience that will be exposed to the ad more than three times

Media Buyers take the media plan recommended by the planners and negotiate its

purchase as inexpensively as possible. The media buyer's front-line experience often

provides invaluable expertise on when and how to make these commitments. As a client's

media budget can be quite large, even small tactical changes can result in big savings.

Research and Account Planning

Advertising agencies have been actively doing research since the 1920s. Historically, this

research has been focused on helping agencies and their client answer specific business

17
questions. For example, a perfume manufacturer might want to know: Do consumers like

this new fragrance?

Which package is more appealing?

Is the main message of this commercial coming through?

What is the market share of this competitor?

While useful for specific issues, traditional research was not an integral part of the

creative development process. All that changed with the emergence of Account Planning.

Started in England during the 1960s, account planning takes a more insightful look into

consumer attitudes, including those about the brands they use. In-depth discussions

among small groups of consumers tell agencies a lot more about what consumers think

and feel than a nationwide survey.

Account Planners use this information in a unique way. Rather than simply report facts,

planners weave facts together into compelling stories. These stories can form the basis of

a brand positioning, a unique product benefit or perhaps even a commercial storyline.

Many agencies have created unique planning processes. For example, 3 Walter

Thompson relies on TTB (Thompson Total Branding"„ McCann has the Brand Footprint,

and Bates offers the Brand Wheel.

While these processes each have a somewhat different approach, they are all intended to

achieve a similar goal: create an identity for the client's brand which is distinct from the

competition and compelling to the target consumer.

Development Budget:

The development budget is required for the whole process of creating the product from

the idea to working prototype.

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Costs that should be included in the development budget include:

· Material. All raw materials used in the development of the product.

· Direct labor. All labor costs associated with the development of the product.

· Overhead. All overhead expenses required to operate the business during the

development phase such as taxes, rent, phone, utilities, office supplies, etc.

· G&A costs. The salaries of executive and administrative personnel along with any

other office support functions.

· Marketing & sales. The salaries of marketing personnel required to develop pre-

promotional materials and plan the marketing campaign that should begin prior to

delivery of the product.

· Professional services. Those costs associated with the consultation of outside

experts such as accountants, lawyers, and business consultants.

· Miscellaneous Costs. Costs that are related to product development.

· Capital equipment. To determine the capital requirements for the development

budget, you first have to establish what type of equipment you will need, whether

you will acquire the equipment or use outside contractors, and finally, if you

decide to acquire the equipment, whether you will lease or purchase it.

Personnel

In order to hire personnel the first needed to be done is to determine which exact areas of

the development process are requiring some additional personnel. To do so, the goals of

the development plan are to be revised to find key points that need attention. After a job

description and job specifications are to be produced. Finally when all required positions

19
are taken and all needed personnel is hired, people needs to be integrated into the

working system. In order to do so each needs to be given some tasks from the work

assignments. Then whole personnel has to know their role in the team and how they are

related one to another. In order to do so, an organizational chart should be developed.

20
 Operations and Management Plan

Organizational Structure:

Account Service

The Account Service teams task is to define how can the agency help its clients to meet

their needs. They engage agency resources as appropriate and ensure all the work done

for the client is suitable for their business and that projects run smoothly.

On a day-to-day basis, this means creating agency teams to work on specific projects,

communicating the agency opinion in formal points of view, presenting work, and setting

timelines and budgets. Account Service is ultimately responsible for ensuring that all

agency work is effective and projects are completed on time within budget.

There are a number of levels within Account Service. Depending upon the size and

requirements of the agency, common positions (starting from the more senior) are as

follows: Director of Client Services (overall responsibility for the Account Service team),

Group Account Director (responsible for a group of accounts, each account headed by an

Account Director), Account Director (may be responsible for more than one account),

Account Manager and Account Executive. All employees are staffed according to its

unique needs.

Creative Services

The creative services group is responsible for making products. Advertising can take

many forms (TV commercials, print ads, and outdoor billboards to name a few), but

collectively they are referred to as "the creative" or "the work." Development of the

creative is divided between a Copywriter (words) and an Art Director (visuals) who work

together to create rough versions of the ads.

21
Overseeing these teams is the agency Creative Director, who approves all the work before

it is shared with the client. Even though the creative director rarely writes ads himself, he

has a tremendous influence on all the work an agency develops. The Creative Director

helps guide each team, ensuring that the work is unique and appealing while strategically

on target.

Once an idea for a radio or TV commercial is ready to be brought to life, a Producer joins

the team. The Producer coordinates with the outside resources necessary to produce

finished ads — in the case of a TV commercial this can include a large group: a

commercial director and his production company, actors and voiceover artists, film

editors, musicians. The producer estimates the cost to produce the ads, oversees the

writing of contracts, and coordinates the production from start to finish. The Print

Production Manager performs a similar function for print ads, estimating costs, briefing

suppliers and coordinating these jobs from start to finish.

Calculation of Revenue& Expenses and Buffers:

When developing the revenue model for our business plan, we should use the simple

equation which consists of the total number of customers and the average revenue from

each customer. Our prediction of monthly gross revenue consist of "T" represents the

total number of people 23(3+20). Three are classical billboards and 20 is maximum

number of LED-monitor users. "A" 200,000 KZT represents the average revenue per

customer, and "S" represents the sales projection. The equation for projecting sales is:

(T)*(A) = S. Thus, S=23*200,000 = 4,600,000 KZT.

Expenses:

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Overhead expenses:

· Travel – We are predicting that we would need to travel to 60% of our clients at

least once per 3 month

Calculations: Approximate number of clients * 60% / 3 months * cost of trip=

average travel cost per month

23*0.6/3*500=2,300 KZT per month

· Maintenance and repair – According to our investigations the cost of maintenance

of 3 regular billboards is 500,000 KZT. For innovational 360-angle LED-billboard

we predicting the average cost of one square meter to be 80,000 KZT. The height

of billboard will be 3 meters, diameter will be 5 meters.

P*D*H*Pr=T, where P-3, 14; D-diameter; H-height; Pr-price of one square meter; T-

total price of monitor.

3.14*5*3*80000=3,768,000 KZT

Total cost of maintenance= 3,768,000+500,000 = 4,268,000 KZT

We decide to spend approximately 1,500,000 KZT per year on repair. It would be

125,000 KZT monthly. If repair is not necessary for equipment, saved money would

be placed on buffer account to accumulate money for future equipment upgrade and

maintenance of new one.

· Rent – Our office expenditure will be 700$ which is 110,000 KZT.

23
· Advertising & promotion – includes our own site and placing ads on Kazakhstan

web-sites, which we predict would cost us 60,000 KZT per month.

· Utilities – consist of cost of utilities of our office and electricity for our LED-

monitor. It would cost 40,000 KZT for office and electricity would be 80,000

KZT

· Taxes –We have Individual Entrepreneurship, therefore we would need to pay

VAT = 10%

· Professional services – Printing of one banner costs 10,000 KZT, regularly is

placed on 3 months we have 3 regular banners

Calculation: 10,000*3 / 3 = 10,000 KZT per month

· Depreciation – Currently, we can not calculate depreciation because regular

banners have depreciation near zero and our LED-monitor is innovational system

and we can not calculate depreciation.

Cost of Goods:

For regular banners:

([Cost of maintenance of 1 banner/12 months] + cost of printing 1 banner + marginal

cost & other expenses) monthly = 200,000 KZT

12 months are used as the number of payments to cover full cost of maintenance of 1

regular banner.

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 (500,000\3)\12 + 10,000\3 + marginal cost & other expenses = 200,000

13,888 + 3,333 + MC = 200,000

17,221 + MC = 200,000

182,779 = MC

Therefore our marginal cost + other expenses (logistics, utilities, etc) + net income =

182,779

For LED:

([Cost of maintenance/60 months] + marginal cost & other expenses) monthly = 200,000

4,268,000/60+ MC = 200,000

71,133+ MC = 200,000

MC = 128,867

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 Financial Statements

“PR” Company

Income Statement

For the Period Ended December 31, 2014

Revenue:

Advertising Revenue(4,6mln*4)………………………………………..KZT 18,400,000

Less Expenses:

Maintenance Expense…………………………………………………………..(4,268,000)

Travel Expense (2,300*4)…………………………………………………………..(9,200)

Repair Expense…………………………………………………………………(1,500,000)

Rent Expense…………………………………………………………………..(1,320,000)

Advertising & Promotion Expense………………………………………………(720,000)

Utility Expense (120,000*12)…………………………………………………(1,440,000)

Banner Printing Expense………………….…………………………………….(120,000)

Income before Taxes……………………………………….……………KZT 9,022,800

Income Tax Expense………………………………………………………… (902,280)

Net Income……………………………………………………………..KZT 8,120,520

Note: We expected to reach Break-Even Point in 5 years, but our goal was reached less
than one year and got profit 8,120,520 KZT.

26
 “PR” Company

Balance Sheet

As of December 31, 2014

Assets:

Cash ……………………………………………………………………KZT 8,120,520

Office equipment…………………………………………...……………………439,740

Total Assets……………………………………………………………KZT 12,060,260

Liabilities& Owners’ Equity:

No liabilities

Owners’ Equity:

Capital Stock

Retained Earnings……………………………………………………………...8,060,260

Total liabilities and owners equity……………………………………KZT 12,060,260

“PR” Company

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 Cash flow statement

As of December 31, 2014

Cash flow from operating activities:

Cash received from revenues…………………………………………..18,400,000

Cash paid for expenses………………………………………………..(10,279,480)

Cash used in operating activities……………………………………...…….8,120,520

Cash flows from investing activities:

Cash invested into operating…………………………………………………..(4,000,000)

Cash flows from financing activities:

Cash received from sale of capital stock……………………………………….4,000,000

Increase in cash:

Cash balance, December 31, 2013…………………………………………8,120,520

Our payback period equals: Total investments divided by Net Income multiple by 365

(days in year). The result of this equation represents number of days in which investments

will be paid back. (Payback period: 4,000,000 / 8,120,520 * 365 = 179.79 = 180). It

means that we will get our investment back in 6 month).

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