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Answer Dash
Answer Dash
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Option 3: Going Vertical: If this option works, they When going industry-
Targeting specific could recover the costs of specific, AD would
customer types or the research and probably have to invest in
industries development, and experts or research and
costumer acquisition will development. This path
start costing less in the would initially increase
long run, since they don’t costs.
have to contact a wide
variety of customers
anymore.
Based on the comparison table above, I would recommend the company to pursue
Option 2. In my opinion, Option 1 should not be an option because AD is an external
entity; therefore, they do not have direct control over the stakeholders and decision
power of their customers. Option 3, on the other hand, could possibly work. However, it
would be a risk to invest more time on research and capital on industry experts. Option 2
offers the least risk, which would allow AD to fail fast and immediately know whether it’s
the right decision to pursue it or not. Incase it doesn’t work out, at least not a lot of
investment (in terms of time and money) was made, and incase it does work out, they
would not lose anything.
2. Calculate the economic value that the AD product delivers for an e-commerce vs a
SAAS. Separate between cost savings and revenue life benefits.
*As a starting point, you can consider an org with 100,000 monthly web visitors and
$1,000,000 in monthly revenue
3. For the strategic option that you support, develop a marketing plan and strategy,
including which companies to target, how to position the value proposition, how to sell an
org, and what pricing method/format to follow.
Economic Value Added
Income Statement
Answer Dash SAAS
REVENUES
$ ₱
Sales 13,560,000.00 12,000,000.00
₱ ₱
Gross Profit 13,560,000.00 12,000,000.00
EXPENSES
Operating Expense
₱ ₱
Answer Dash Expense 720,000.00 7,188.00
₱ ₱
Customer Support Staff 120,000.00 360,000.00
₱ ₱
Other Expenses 6,832,812.00 6,832,812.00
₱ ₱
TOTAL EXPENSES 7,672,812.00 7,200,000.00
₱ ₱
Income before Taxes 5,887,188.00 4,800,000.00
₱ ₱
Taxes (35%) 2,060,515.80 1,680,000.00
₱ ₱
NOPAT 3,826,672.20 3,120,000.00
Assumptions
Sales 13% more
Customer Suppor
Staff 67% more
Profit Margin 60%
Tax 35%
ECONOMIC VALUE ADDED
AnswerDash SAAS
NOPAT $ 3,826,627.20 ₱ 3,120,000.00
AFTER TAX WACC $ 2,953,600.00 ₱ 2,953,600.00
EVA $ 873,027.20 $ 166,400.00
Assumptions
COMPANY X
Amount of Financial Capital 10000000
Tax 35%
WACC 29.50%
Debt 4,800,000
Total Assets 10,000,000
Equity 5,200,000
AD’s current costumer acquisition cost is at $1500/customer. Small clients pay only
$99/month, and they are allowed to unsubscribe any time. Given this, it would be difficult
for AD to recover their costs, and they must find a way to secure themselves financially.
One way to do this is by revising their pricing tiers.
Since AD will now shift their focus to Enterprises only, the pricing tier can be modified
this way.
Basic Enterprise
$999/month $1499/month
Company partnership
More often than not, big corporations only entrust themselves to be serviced by
reputable corporations. Having only 4 customers at that time, doesn’t help increase AD’s
credibility. One way to improve this is to give 1 reputable corporations AD’s services for
free or at least at cost. Based on all their previous customers’ experiences, AD has
helped improve sales. All they have to do is encourage a respectable company to take
on these services, so that other corporations will be interested to follow and take on AD’s
services as well.
Sales pitches
Once they’ve been able to establish a decent reputation with a partner company (as
stated above), they can now more on to a more personal approach. Since they now
have credibility, big companies should be more open to entertaining them. A personal
sales pitch could be more entising, which will hopefully encourage the companies to
avail of AD’s services.
Target Companies
Improve strategy
Based on their performance as a service firm and in their sales pitches, they should
adjust their existing strategy accoridngly to further boost sales and profit.
YEAR 1
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