5.0 Marketing Strategy and Implementation
In order to grow revenues 20% annually and to keep pace with peers, ITS must sell $152,000 in new revenue or put another way, bill an additional 1,344 hours annually. ITS has built in cushions into its pricing model, which easily allows for just such an increase.
For example in proforma Year One, ITS estimates that it will bill 2,794 hours in billable revenue. (2,794 hours * $113.07 hourly rate =$315,917 in revenues). However, with a staff of 5 employees working 40 hours a week, the company has the potential for 9,600 hours annually. The additional burden of 1,344 hours could easily be absorbed by current staff. ITS, however, chose to keep a conservative estimate by basing the projected income and expenses similar to its peers.
5.1 SWOT Analysis
- By utilizing its lean experienced staff, focusing on specific target markets and providing detailed project outlines, ITS provides high end consulting services at a reasonable price.
- ITS is flexible, able to ‘turn on a dime’ and meet / exceed deadlines and easily adapts to changes as needed.
- ITS pursues a minimum of 20% of its revenues in the form of contracts – which provide income stability.
- Product obsolescence and technology changes.
- Rapid life cycle; IT industry quickly can be subject to obsolescence with the advent of new technology.
- Substitution – many of the services ITS provides can be mirrored by competitors – even worse, larger competitors although have longer turnaround times, may be able to offer lower prices due to larger economies of scale.
- Customer base is limited with a potential for concentration risk should one sector become less than profitable.
- ITS has already attained WOSB status, making them attractive to partner with in prime government contracts.
- New technologies in cutting edge in energy and healthcare industry make the Charlotte market a robust one for subcontracting.
- Cash flow will be critical if payment from the contractor is delayed for any lengthy time period.
- National competitors might be able to reduce their prices due to efficient in economies of scale.
5.2 Strategy Pyramid
ITS plans on achieving a minimum of 20% of its revenues in the form of recurring consulting base, to cushion against revenue decline when the spending environment deteriorates. Long-term outsourcing contracts provide revenue continuity: Contracts are often five to ten years long, and are rarely broken. ITS plans on achieving this goal by providing top notch service to its customer base with detailed follow-ups and reviews. By keeping its narrow focus on target markets and needs, ITS can quickly alert clients of improvements and new technologies. With its commitment to training and education, ITS employees can readily adapt and perform routine upgrades. These services are often built into the contracts up front, automatically generating residual income.
5.3 Unique Selling Proposition (USP)
ITS has set itself apart from its competitors by 1) its narrow and target market focus (energy and defense). By completely understanding industry trends and trends ITS is truly the market expert. 2) ITS’ extreme attention to detail in its subcontracts and project planning sets them apart from their peers. 3) Because of its small size, ITS has the ability to not only meet /exceed deadlines, but they can adapt quickly and on short notice. 4) All these factors lead to cost savings which in turn are passed on to their clients in the form of cost savings.
5.4 Competitive Edge
That fact that ITS works with both local government contractors, has a narrow, specific targeted customer base, combined with WOSB status and a proven track record, gives ITS an edge over the competition.
5.5 Marketing Strategy and Positioning
ITS is uniquely poised as government subcontractor by its narrow focus on the energy and healthcare sectors. This focus allows for detailed models, specifically targeted to these industries. ITS utilized a focus strategy – and positions itself to cater to the needs of a narrowly defined market.
5.5.1 Positioning Statement
ITS’ goal is to be the premier subcontractor in the energy and healthcare sector. By, crafting detailed project plans, utilizing detailed models, defining the deliverables and anticipating the steps needed to complete each a and every project they undertake. ITS with its talented pool of in house talent perform all the work themselves, keeping overhead low and passing the savings onto their clients. ITS is not mired in red tape and can readily meets its milestones and deadlines and adapts easily to change. ITS motto is ‘We don’t just get the job done the first time, we get it done right”.
5.5.2 Pricing Strategy
ITS charges a flat rate of $113 per hour
- One hour on–site minimum
- The flat rate does not increase because of emergencies
5.5.3 Promotion and Advertising Strategy
ITS relies primarily on direct marketing by word of mouth. Ms. Jayne is a member of the Charlotte Chamber of Commerce and has promoted the business by word of mouth and volunteering for many of the chamber events and sponsoring happy hours and corporate luncheons.
The company has a website which is another marketing tool.
ITS plans to join IT Energy Trade Groups and IT Healthcare Trade Associations.
The ITS website identifies who the company is, a brief history, and services and products provided. The website has a “Who We Are” section featuring pictures and brief biographies of the ITS staff. The site has links to related sites such as SUB-net a database that lists all opportunities from government contractors and FedBizOpps.gov, the searchable federal opportunities database.
The website features case studies with actual clients with needs and benefit analysis.
5.5.5 Marketing Programs
ITS, with its limited budget, will rely heavily on face to face time with contacts. Through her extensive contacts while made working in the industry, Ms. Jayne plans to continue meeting directly with prospects. The IT community is close-knit and word travels quickly.
5.6 Sales Strategy
It is impractical to have a try before you buy in the IT field; however, ITS likes to present its prospects with the next best thing, an initial free consultation and evaluation. The potential client is given a detailed questionnaire to complete and forwarded to ITS for review. The questionnaire is invaluable and helps ITS determine options best suited for the client. ITS thoroughly believes that by truly understanding their customers, they can create custom Project Plans and win subcontracts.
5.6.1 Sales Forecast
ITS expects to grow revenues 20% annually over the next three years. In order to grow revenues 20% annually and to keep pace with peers, ITS must sell $152,000 in new revenue or put another way, bill an additional 1,344 hours annually. ITS has built in cushions into its pricing model, which easily allows for just such an increase.
For example in proforma Year One, ITS estimates that it will bill 2,794 hours in billable revenue. (2,794 hours * $113.07 hourly rate =$315,917 in revenues). However, with a staff of 5 employees working 40 hours a week, the company has the potential for 9,600 hours annually (or $1,085,472). The additional burden of 1,344 hours could easily be absorbed by current staff. This business plan however employs a more conservative approach with sales and assets reflective of industry peers.
Table 5.6.1 Annual Sales Forecast
5.6.2 Sales Programs
ITS awards it employees with a lucrative incentive package to include bonus and profit sharing. For the initial three years employees will receive small bonuses, but over time, bonuses and profit sharing will commensurate with annual revenues.
ITS is a Chapter S-Corporation doing business in the State of North Carolina. The company is wholly owned by Sara Jayne.
The following milestones will assist ITS in gauging its target metrics.
Table 5.8 Milestones
5.9 Exit Strategy
If revenues fall below break-even for four consecutive periods, the company will not have sufficient cash flow or working capital to meet operating needs. At such time, the company would require liquidation and disposal of assets, primarily the computers and hardware. Secured creditors would be paid first, then unsecured with the remainder to the investor(s).