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Advertising Agency Business Plan
Advertising Agency Business Plan
Promerit Advertising
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Executive Summary
Promerit Advertising will offer marketing services to companies that are looking to employ email
marketing techniques as the cornerstone of their marketing program. It is estimated that in Year 1,
over 250 billion emails will travel across cyberspace. Email marketing is quickly becoming a cost-
effective method to reach a target audience. According to Jupiter Communication research, email ad-
response rates currently averages between five to 15 percent. At the same time, the report noted that
only 15 percent of Web users read all email messages in their entirety.
The potential is there but so is the risk that the target customer will completely reject the advertising.
Email marketing is a science. There are effective strategies that will assure that the company will
reach the greatest number of potential customers.
Promerit Advertising specializes in successful email marketing campaigns. Its owners, Robert
Humphrey and Cheryl Littlejohn have over eight years of experience in email marketing campaigns
between them. Robert was project leader for the successful Buy.com and Verison email marketing
campaign. Cheryl was technical lead of 800.com's successful email campaign before joining Robert
as technical lead of the Verison email campaign.
Promerit Advertising will design, build, test and deploy the email campaign. It will also report the
progress of the campaign in real-time to provide our customers maximum flexibility. At the end of the
campaign, Promerit will analyze its success in order to improve the company's future campaigns.
1.1 Mission
Promerit Advertising will offer its customers the best methods and tools in planning and implementing
a successful email campaign. Our campaigns will cut through the mumbo jumbo of mass
marketing, increase sales, and enhance customer satisfaction with the company. Promerit Advertising
email campaigns will grab readers immediately and drive home the right message to the right
audience. We will exceed our customers' expectations for campaign returns.
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Company Summary
Promerit Advertising will design, build, test and deploy the email campaign. It will also report the progress of the
campaign in real-time to provide our customers maximum flexibility. At the end of the campaign, Promerit will
analyze its success in order to improve the company's future campaigns.
Robert Humphrey and Cheryl Littlejohn are the owners of Promerit Advertising.
Robert Humphrey and Cheryl Littlejohn will invest equally in the company. They will also secure a long-term
business loan. The following table and chart show projected initial start-up costs of Promerit Advertising.
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Start-up Funding
Start-up Expenses to Fund $34,500
Assets
Liabilities
Current Borrowing $0
Capital
Planned Investment
Other $0
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Start-up
Requirements
Start-up Expenses
Legal $1,000
Stationery etc. $1,000
Brochures $1,000
Advertising $20,000
Insurance $0
Rent $1,500
Other $0
Start-up Assets
Long-term Assets $0
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Services
The services offered by Promerit Advertising cover an email marketing project in its entirety, from original concept
to post-campaign evaluation. The service includes the following:
Design the campaign
Personalization and targeting
Email list management
Building deployment system
Testing the plan
Implementing the campaign
Tracking the campaign's progress in real-time
Instant measurability for ROI analysis
Post-campaign analysis
It was recently reported in an eMarketeer online advertising report that online promotions are very powerful with
offline companies, as well as online companies. Though offline companies are offering promotions that
necessitate the customer going to one of the company's stores, consumers feel positive about the online
promotions. This opens up a new avenue for these companies to target customer groups that use computers at
work and at home.
Consumers said they cared mostly about return policies, customer service, and product selection. A very
impressive 94 percent of surveyed users reported they have shopped online before. About 76 percent of those
surveyed said promotions were a positive influence on their buying behavior. Some 50 percent said online
coupons were especially persuasive while 70 percent found offline coupons equally attractive.
An email campaign can be used to reach target customers no matter how small a company's Internet presence
is, as long as the customer wants the product.
There are two distinct customer groups that Promerit Advertising is focused on:
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Market Analysis
Year 1 Year 2 Year 3 Year 4 Year 5
Potential
Customers Growth CAGR
Other 0% 0 0 0 0 0 0.00%
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By any measure, the Internet is one of the fastest-growing commercial phenomena ever witnessed by society.
Host computers, or servers, have exploded from 3.2 million in 1994 to roughly 79.2 million as of July 2001.
During the same time period, the number of websites roared to more than 6 million from only 3,000.
A key factor in the recent growth of the Internet is the popularity of the sub-$1,000 PC. Rapidly falling component
prices have allowed PC manufacturers to pass cost savings on to their customers, resulting in a more attractively
priced product. Computers sold at or below the $1,000 level have appealed to first-time PC users and lower
income families. Because of the more affordable prices, PC penetration in the United States is now
approximately 50%, according to Dataquest, a market research firm based in San Jose, California.
The United States accounts for more than half of the world's total Internet users. When consumers today are
asked why they purchased a personal computer, the most common answer is to connect to the Internet to get
their email.
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Strategy and Implementation Summary
Promerit Advertising's strategy is to utilize the extensive network of contacts both Robert and Cheryl have with
companies already sold on the value of email marketing. In addition, Promerit will use its internal expertise to
launch an email marketing campaign directed at a select group of its target customers.
With over two million potential customers, Promerit Advertising will focus an email campaign on a select group of
50,000 businesses each fiscal quarter. We estimate a five percent response rate to the campaign which will
generate 1,250 leads. These leads will then be used to generate business contacts. Over the year, we will
generate 5,000 leads.
Promerit Advertising's sales strategy is simple. We will use the email marketing campaign directed at our
customer base as a model of what we can accomplish for them. We anticipate that online companies will be
most accessible to our services. We will be successful with offline companies overtime, but initially sales will be
weak with this group.
The following is the sales forecast for three years. We have no cost of sales, as all of our deliverables are
electronic, and our labor costs are included in the Personnel table.
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Sales Forecast
Year 1 Year 2 Year 3
Sales
Online Companies $0 $0 $0
Offline Companies $0 $0 $0
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Robert Humphrey has five years of experience in email marketing campaigns and ten years of experience in
direct marketing. He is a graduate of Ohio State University with a BA in marketing. Robert worked with several
advertising companies before arriving at Kemp and Johnson Advertising in 1997. With Kemp and Johnson,
Robert created and grew the Internet marketing group. Robert was project leader for the successful Buy.com
and Verison email marketing campaign.
Cheryl Littlejohn graduated with a BS in computer science from UCLA in 1996. She immediately went to work for
the Internet start-up Temple Communication as an IT administrator. She left in 1998 to join the start-up
800.com as the technical lead of its email campaign. In 2000, she joined Richard's Internet group at Kemp and
Johnson as technical lead of the Verison email marketing campaign.
Email marketing is an emerging marketing tool with few industry experts. Robert and Cheryl's accomplishments
over the past three years has been singled out by the industry as models for successful email marketing
campaigns.
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Management Summary
Robert Humphrey will be responsible for tactical elements of the marketing campaign and Cheryl Littlejohn will
manage the technical aspects of the campaign.
6.1 Personnel Plan
In addition to Robert and Cheryl, there will be three other staff members:
Secretary/Receptionist
Accountant
Salesperson
Personnel Plan
Year 1 Year 2 Year 3
Robert Humphrey $32,000 $40,000 $45,000
Cheryl Littlejohn $32,000 $40,000 $45,000
Secretary/Receptionist $20,000 $25,000 $28,000
Salesperson $38,000 $50,000 $55,000
Bookkeeper $20,000 $26,000 $29,000
Other $0 $0 $0
Total People 5 5 0
Total Payroll $142,000 $181,000 $202,000
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Financial Plan
The monthly sales break-even point is is shown in the table and chart below.
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Break-even Analysis
Monthly Revenue Break-even $19,308
Assumptions:
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Expenses
Depreciation $0 $0 $0
Leased Equipment $0 $0 $0
Insurance $0 $0 $0
Other $0 $0 $0
The following table and chart highlight the projected cash flow for three years.
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Cash Received
Dividends $0 $0 $0
Assets
Current Assets
Long-term Assets
Long-term Assets $0 $0 $0
Accumulated Depreciation $0 $0 $0
Current Liabilities
Current Borrowing $0 $0 $0
Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard
Industrial Classification (SIC) code 7311, Advertising Agencies, are shown for comparison.
Ratio Analysis
Industry
Year 1 Year 2 Year 3 Profile
Percent of Sales
Main Ratios
Activity Ratios
Debt Ratios
Liquidity Ratios
Net Working Capital $130,710 $162,821 $277,428 n.a
Additional Ratios
Sales Forecast
Mont Mont Mont Mont Mont Mont Mont Mont Mont Mont Mont
h1 h2 h3 h4 h5 h6 h7 h8 h 9 h 10 h 11 Month 12
Sales
$6,00 $6,00 $10,9 $12,0 $14,4 $16,0 $16,0 $17,0 $18,0 $19,0 $20,5
Online Companies 0% 0 0 00 30 00 00 00 00 00 00 00 $23,000
$6,0 $6,0 $10,9 $12,0 $18,4 $21,0 $20,0 $23,0 $24,0 $24,0 $27,5
Total Sales 00 00 00 30 00 00 00 00 00 00 00 $33,000
Direct Cost of Mont Mont Mont Mont Mont Mont Mont Mont Mont Mont Mont
Sales h1 h2 h3 h4 h5 h6 h7 h8 h 9 h 10 h 11 Month 12
Online Companies $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Offline Companies $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Direct
Cost of Sales $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
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Personnel Plan
Mont Mont Mont Mont Mont Mont Mont Mont Mont Mont Mont
h1 h2 h3 h4 h5 h6 h7 h8 h 9 h 10 h 11 Month 12
$2,00 $2,00 $2,00 $2,00 $3,00 $3,00 $3,00 $3,00 $3,00 $3,00 $3,00
Robert Humphrey 0% 0 0 0 0 0 0 0 0 0 0 0 $3,000
$2,00 $2,00 $2,00 $2,00 $3,00 $3,00 $3,00 $3,00 $3,00 $3,00 $3,00
Cheryl Littlejohn 0% 0 0 0 0 0 0 0 0 0 0 0 $3,000
Other 0% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total People 5 5 5 5 5 5 5 5 5 5 5 5
$4,0 $4,0 $11,0 $11,0 $14,0 $14,0 $14,0 $14,0 $14,0 $14,0 $14,0
Total Payroll 00 00 00 00 00 00 00 00 00 00 00 $14,000
General Assumptions
Mont Mont Mont Mont Mont Mont Mont Mont Mont Mont Mont
h1 h2 h3 h4 h5 h6 h7 h8 h9 h 10 h 11 Month 12
Plan Month 1 2 3 4 5 6 7 8 9 10 11 12
Current 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00
Interest Rate % % % % % % % % % % % 10.00%
Long-term 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00
Interest Rate % % % % % % % % % % % 10.00%
30.00 30.00 30.00 30.00 30.00 30.00 30.00 30.00 30.00 30.00 30.00
Tax Rate % % % % % % % % % % % 30.00%
Other 0 0 0 0 0 0 0 0 0 0 0 0
Mont Mont Month Month Month Month Month Month Month Month Month
h1 h2 3 4 5 6 7 8 9 10 11 Month 12
$6,00 $6,00 $10,9 $12,0 $18,4 $21,0 $20,0 $23,0 $24,0 $24,0 $27,5
Sales 0 0 00 30 00 00 00 00 00 00 00 $33,000
Direct Cost of
Sales $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other
Production
Expenses $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Cost of
Sales $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
Gross Margin % % % % % % % % % % % % 100.00%
Expenses
Sales and
Marketing and
Other
Expenses $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000
Depreciation $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Leased
Equipment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Utilities $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200
Insurance $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Rent $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500
Payroll Taxes 15% $600 $600 $1,650 $1,650 $2,100 $2,100 $2,100 $2,100 $2,100 $2,100 $2,100 $2,100
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total
Operating $10,3 $10,3 $18,3 $18,3 $21,8 $21,8 $21,8 $21,8 $21,8 $21,8 $21,8
Expenses 00 00 50 50 00 00 00 00 00 00 00 $21,800
Profit Before
Interest and ($4,30 ($4,30 ($7,45 ($6,32 ($3,40 ($1,80
Taxes 0) 0) 0) 0) 0) ($800) 0) $1,200 $2,200 $2,200 $5,700 $11,200
Interest
Expense $819 $806 $792 $778 $764 $750 $736 $722 $708 $694 $681 $667
Taxes Incurred $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
($5,1 ($5,1 ($8,24 ($7,09 ($4,16 ($1,55 ($2,53 $1,49 $1,50 $5,01
Net Profit 19) 06) 2) 8) 4) 0) 6) $478 2 6 9 $10,533
- - - - - -
Net 85.32 85.09 75.61 59.00 22.63 - 12.68 18.25
Profit/Sales % % % % % 7.38% % 2.08% 6.22% 6.27% % 31.92%
Month Month Month Month Month Mont Mont Mont Mont Mont Mont
1 2 3 4 5 h6 h7 h8 h 9 h 10 h 11 Month 12
Cash Received
Cash from
Operations
Subtotal Cash $1,50 $12,80 $14,4 $18,8 $21,4 $21,0 $23,2 $24,8
from Operations 0 $1,650 $7,225 $7,630 3 32 65 75 75 75 75 $26,338
Additional Cash
Received
New Current
Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Other
Liabilities (interest-
free) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Long-term
Liabilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Sales of Other
Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Sales of Long-term
Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
New Investment
Received $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Cash $1,50 $12,80 $14,4 $18,8 $21,4 $21,0 $23,2 $24,8
Received 0 $1,650 $7,225 $7,630 3 32 65 75 75 75 75 $26,338
Month Month Month Month Month Mont Mont Mont Mont Mont Mont
Expenditures 1 2 3 4 5 h6 h7 h8 h 9 h 10 h 11 Month 12
Expenditures from
Operations
Subtotal Spent on $4,23 $11,11 $18,14 $19,14 $22,14 $22,5 $22,5 $22,5 $22,5 $22,5 $22,4
Operations 7 9 0 1 2 63 50 36 22 08 94 $22,480
Additional Cash
Spent
Principal Repayment
of Current
Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Other Liabilities
Principal Repayment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Purchase Other
Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Purchase Long-term
Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Dividends $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Cash $5,90 $12,78 $19,80 $20,80 $23,80 $24,2 $24,2 $24,2 $24,1 $24,1 $24,1
Spent 4 6 7 8 9 30 17 03 89 75 61 $24,147
($4,40 ($11,1 ($12,5 ($13,1 ($11,0 ($9,7 ($5,3 ($2,7 ($3,1 ($900
Net Cash Flow 4) 36) 82) 78) 06) 99) 52) 28) 14) ) $714 $2,190
$151, $139,9 $127,3 $114,1 $103,1 $93,3 $88,0 $85,3 $82,2 $81,3 $82,0
Cash Balance 096 60 78 99 93 95 43 16 02 02 16 $84,206
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Month Month Month Month Month Month Month Month Month Month Month
1 2 3 4 5 6 7 8 9 10 11 Month 12
Starting
Assets Balances
Current Assets
$151,0 $139,9 $127,3 $114,1 $103,1 $93,39 $88,04 $85,31 $82,20 $81,30 $82,01
Cash $155,500 96 60 78 99 93 5 3 6 2 2 6 $84,206
$10,00 $10,00 $10,00 $10,00 $10,00 $10,00 $10,00 $10,00 $10,00 $10,00 $10,00
Other Current Assets $10,000 0 0 0 0 0 0 0 0 0 0 0 $10,000
$165,5 $158,8 $149,9 $141,1 $135,7 $132,4 $128,2 $127,0 $126,8 $126,7 $130,0
Total Current Assets $165,500 96 10 03 24 15 85 68 66 77 02 41 $138,894
Long-term Assets
Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Accumulated
Depreciation $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Long-term $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Assets
$165,5 $158,8 $149,9 $141,1 $135,7 $132,4 $128,2 $127,0 $126,8 $126,7 $130,0
Total Assets $165,500 96 10 03 24 15 85 68 66 77 02 41 $138,894
Month Month Month Month Month Month Month Month Month Month Month
Liabilities and Capital 1 2 3 4 5 6 7 8 9 10 11 Month 12
Current Liabilities
Accounts Payable $0 $6,882 $6,869 $7,870 $7,857 $8,278 $8,265 $8,252 $8,238 $8,225 $8,211 $8,198 $8,184
Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Current
Liabilities $0 $6,882 $6,869 $7,870 $7,857 $8,278 $8,265 $8,252 $8,238 $8,225 $8,211 $8,198 $8,184
$98,33 $96,66 $94,99 $93,33 $91,66 $89,99 $88,33 $86,66 $84,99 $83,33 $81,66
Long-term Liabilities $100,000 3 6 9 2 5 8 1 4 7 0 3 $79,996
$105,2 $103,5 $102,8 $101,1 $99,94 $98,26 $96,58 $94,90 $93,22 $91,54 $89,86
Total Liabilities $100,000 15 35 69 89 3 3 3 2 2 1 1 $88,180
$100,0 $100,0 $100,0 $100,0 $100,0 $100,0 $100,0 $100,0 $100,0 $100,0 $100,0
Paid-in Capital $100,000 00 00 00 00 00 00 00 00 00 00 00 $100,000
($34,50 ($34,50 ($34,50 ($34,50 ($34,50 ($34,50 ($34,50 ($34,50 ($34,50 ($34,50 ($34,50
Retained Earnings ($34,500) 0) 0) 0) 0) 0) 0) 0) 0) 0) 0) 0) ($34,500)
($5,119 ($10,22 ($18,46 ($25,56 ($29,72 ($31,27 ($33,81 ($33,33 ($31,84 ($30,33 ($25,32
Earnings $0 ) 5) 7) 4) 8) 8) 4) 7) 5) 9) 0) ($14,786)
$60,38 $55,27 $47,03 $39,93 $35,77 $34,22 $31,68 $32,16 $33,65 $35,16 $40,18
Total Capital $65,500 1 5 3 6 2 2 6 3 5 1 0 $50,714
Total Liabilities and $165,5 $158,8 $149,9 $141,1 $135,7 $132,4 $128,2 $127,0 $126,8 $126,7 $130,0
Capital $165,500 96 10 03 24 15 85 68 66 77 02 41 $138,894
$60,38 $55,27 $47,03 $39,93 $35,77 $34,22 $31,68 $32,16 $33,65 $35,16 $40,18
Net Worth $65,500 1 5 3 6 2 2 6 3 5 1 0 $50,714