Business Plan For LEO & ANK LTD

Company

Contact Information:

213 Edinburgh Street,

Hull, England,
HU3 5AN
07417390707

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This is a business plan and does not imply an offering of securities.

 Table of Contents

1. Executive Summary 1
Business Opportunity
Product/Service Description

2. Company Background 3
Business Description
Company History

3. Business Plan For LEO & ANK LTD Company 5

4. Services 6

5. The Industry, Competition, and Market 7

Market Definition
Primary Competitors
Customer Profile

6. Marketing Plan 10

7. Financial Plan 12
Investment Plan
Break-even Analysis
Liquidity Plan
Earnings Plan
Risk Analysis

8. Conclusion 20
Business Plan For LEO & ANK Ltd Company 1

1. Executive Summary
A worldwide logistics service is one concept that lately showed significant growth potential.
For the UK, the industry expects significant growth rates to persist in the near future, so that
investments in that segment are very profitable. The expected profitability is about 15% and
the growth rate about 8%, depending on the specific services that will be offered.

The goal of this next phase is the operation of a logistics company that offers a selected
range of logistics, planning and transportation services. Services will be offered worldwide,
but with a focus on the UK markets. In addition to this core business, LEO & ANK Ltd
provides a storehouse and technical services to increase revenues.

1.1 Business Opportunity

The logistics industry currently shows a strong growth marked by a higher demand, but
also growing costs. The development of new business strategies and solutions seems
critical for new industry players to get market shares and survive in this highly
competitive industry. The choice of services, as well as the development of applications,
can be one strategy in this field of business. Additionally, sound cost management is of
critical importance for a solid stream of revenues. Big industry players have shown that,
even in a competitive market, growth rates of more than 20% can be sustained.

The operation of a logistics company that offers the following services is the core of this
business plan:

general logistics services

transportation services
planning services
distribution planning
just-in-time delivery

A strong focus of this business will be placed on the development of new and innovative
strategies for the customers that deliver a significant value. As an add-on, a broad range
of customized services will be offered, which will help utilize company and employee
capacity. The range of products is selected to provide solid growth potentials.

The operation of LEO & ANK Ltd requires a good knowledge of the markets, as well
as a competitive logistics service concept, to increase customer satisfaction. However,
it is critical that this service is offered with a strong focus on cost management.

One central goal of the proposed business strategy is the development of a unique
corporate identity. Such identity will create customer loyalty and help gain a competitive
advantage. Therefore, it is planned that, in addition to the selection of new and interesting
services, a company design is developed. For this reason, the service around the offered
applications and the additional businesses is very extensive.
Business Plan For LEO & ANK Ltd Company 2

The required investment for the proposed business is moderate compared to other
companies in the industry. Labor is expected to be the main cost driver, whereas no other
substantial investment in fixed assets is required. Depending upon the location, the
minimum required investment amount ranges between £70,000 and £100,000 in the
firts phase, based on a 7-10% average revenue margin. This amount is well within the
financial requirements observed for other comparable companies.

1.2 Product/Service Description

LEO & ANK Ltd already operates in the logistics and transportation industry with
several services. An additional source of revenues is the development of new services.
This can range from computer planning systems to distribution services. Cross selling is
planned to be one of the prime strategies in this business, since all products are targeted
to serve a similar need and can easily be combined. Synergy in selling product across
business segments is likely to boost earning further. Net earnings are expected to be at
least 3% above traditional trading businesses with only one sales segments.

Figure 1.1 shows the revenue mix across segments in the first phase. This projection is
based on the expected strategic direction, investment amount and business environment.
As the core business, the logistics segment is expected to generate the largest share in
revenues. The sale of planning and transportation services is expected to be another
important generator of revenues which also helps utilize invested capacity.
The sale of consulting services is expected to be intensified.
Business Plan For LEO & ANK Ltd Company 3

2. Company Background
LEO & ANK Ltd is a small medium business company established in May 2019. The goal
of this business is the operation of a logistics business with different services and similar
offers. Additionally, the sale of planning and consulting services is planned to reach an
optimal utilization of personnel and company capacity. An initial investment amount of at
least £70,000 is required, which will allow the operation of a small business with 4 to 5
employees. Sales revenues are expected to range between £100,000 and £200,000 in the first
phase and the operation is expected to generate profits starting in the first or second business
year.

2.1 Business Description

LEO & ANK Ltd use a core business model B15 Modelmaking workshop to firms that
provide one stop profession service in transportation and freight. Management is
expected to have a solid knowledge of the markets and the offered services to influence
the customers. The goal is to create an innovative business in which the customer
experiences competent service. A well chosen and targeted selection of offerings will
complement this strategy. Both aspects are core requirements to build customer loyalty.
Repeat customers are expected to generate revenues of 40% and more. Although this
strategy is likely to require additional investments, it is expected that revenues per
customer will increase significantly and range above industry average.
Furthermore, this strategy will provide a clear entrance barrier for prospective
competitors.

The development and promotion of a corporate identity is another central task for
management. Given the homogeneity of businesses in this industry, the development of a
corporate identity will markedly increase sales revenues and build a customer base.
Furthermore, a corporate identity will support expanding the business to a larger
international target market.

2.2 Company History

In the first phase, the LEO & ANK Ltd is operated as a one-person-business. This set up
carries a certain risk potential because of the high equity stake the manager bears and the
personal and statutory liability assumed. However, this set-up preserves a high degree of
flexibility in managerial decision making.

The number of personnel to be employed depends on the structural complexity of the

operations and the desired size. Figure 2.1 shows a break up of costs in the industry. It is
expected that the target employee earns a monthly salary of £4,500 to £6,000 based on 42
hours per week. The sales and service area requires 1 to 2 employees on average working
in 2 shifts. Due to illness and vacation times, in the long run an average of 4 permanent
employees will be required after the first phase. With increasing sales and better
utilization of employee work time, revenue margins will increase and thus, costs per
employee will decrease on average. With revenues ranging around £500,000, capacity
utilization is expected to be around 85%.

During the first phase, a single person will attend to all necessary management task,
coordinate employees and provide strategic direction to the developing business.
Accounting, administrative and machine maintenance will be outsourced to an external
Business Plan For LEO & ANK Ltd Company 4

partner, since those tasks can typically be provided at better rates externally. Sourcing
and marketing will require one employee.

Finding the optimal location for a business is one of the success factors in the short and
long run. This is also important for international businesses because taxes, employees and
additional costs are crucial for all businesses. The following analysis is based on 10
businesses in the logistics industry. Since a small company is recruiting its customers
typically from the home country and later from a worldwide area, a national location is
considered as the core market.

For the location with a core market in the selected region, the following factors are
relevant:

The taxes and other administration costs are low.

Administrative costs are expected to be comparably small given the expected revenues.
The possibility to recruit additional personnel is favorable.
Public institutions are expected to provide additional sponsoring.
It is easy to find appropriate employees.

Because of the favorable growth perspectives in the chosen market and growing
investment activities, we expect to realize yearly growth rates in revenues of 15-20%
given a 4% economic growth rate.
Business Plan For LEO & ANK Ltd Company 5

3. Business Plan For LEO & ANK Ltd Company

One of the key elements of a successful business in the logistics industry is the selection of
services that are as profitable as possible. One key element of a profit maximization strategy
is to minimize the costs and to increase the sales volume. The following services show the
highest demand and the best profitability, depending on input costs on the one hand and sales
revenues on the other hand:
-general logistics services
-international
-transportation just-in-time
-delivery distribution
-cost optimization

The specific selection of services and applications offered will be monitored constantly and
vary according to business needs. This strategy provides a competitive edge against other
companies in the environment and is expected to generate an additional demand and the
possibility for a price mark-up.

The development of warehouse and a storage system are two key elements of a successful
logistics and transportation business. The following services will be offered in this segment:

-storage capacity
-transportation services
-international freight

All services will be monitored to find out an optimal combination of services.

4. Services
LEO & ANK Ltd offers additional service elated to the core of the business to provide other
fields of the business. The available competence will be used for further business activities
that will generate additional revenues. While this is not a core business segment, this concept
has growth potential because the demand for planning and consulting services is rising.
Initially, the investment in inventory, technical equipment and personnel capacity of this
segment is limited. Especially, the supply of complex logistics planning with a higher priced
range will require extensive service. This strategy will help utilize the capacity in personnel,
since it allows for an optimal coordination of employees. All employees will be trained to
cover all aspects of individual services for the customer.
Business Plan For LEO & ANK Ltd Company 6

5. The Industry, Competition, and Market

A careful analysis of the market and competitive forces in this industry is a key element in
assessing the business potential of our project. This analysis will provide marketing and sales
data that are indispensable to develop the business potential optimally. The main competitors
are comparably-sized medium and large logistics companies in the international environment
with a similar selection of products and services. Since the planned project is of international
scope with a single headquarter, the competitive analysis will have to focus on the
international and local market. The market and competition analysis will be based on the
entire market.

5.1 Market Definition

Figure 5.1 shows average growth figures in revenues of typical logistics companies
during the past 10 years. A lot of companies in this industry have experienced constant
growth rates of more than 15% to 20% since 1999. For 2005, a growth of 17% is
expected with a strong development in the third and last quarter.

Despite slowing economic growth and decreasing customer demand, the international
logistics industry underwent a relatively favorable development. New and innovative
business concepts in the sector still show high growth potentials, while growth rates of
traditional businesses in that industry were below average. The significant growth of new
business concepts is primarily due to sharp cost control and more efficient business
strategies that accounted for higher revenue and earning figures. According to industry
estimates, 30% of such innovative businesses gained from cross-selling activities
between their business segments. Sinking prices of input products and service costs have
allowed the industry to partially compensate for slowing demand. Savings in input costs
were also due to decreased labor costs. However, starting in 2006, this trend is expected
to reverse and growth rates will pick up markedly, despite the uncertainty in the
development of input prices and worldwide economic developments.

5.2 Primary Competitors

The competitive environment is primarily determined by the choice of item groups, but
also the regional location. But, regardless of the selection of items, high mark-ups are not
Business Plan For LEO & ANK Ltd Company 7

feasible in the long run, since this will attract competitors who compete away any rents.
With a high density of businesses in one location, businesses with the highest marginal
cost will be driven out of the market. Such locations will yield a return of 12-14% on
average. This is the expected equilibrium return in a saturated market. To further analyze
the competitive environment, it is necessary to define the players in that environment. A
firm that generates £300,000 to £1,000,000 in revenues and employs 5 to 10 people
should regard a firm with revenues and personnel 3 times this figures as a viable
competitor. On the product and service side, businesses with a comparable selection of
offers are regarded as competing in the same market segment. Figure 5.4 shows the size
of businesses in this market segment, which also includes different products and services
that will be sold worldwide. The numbers are based on average revenues of companies
that run their business more than five years.

5.3 Customer Profile

The specialized way of distribution and offerings are primarily targeting large
international companies. A possible segmentation to identify different customer groups is
by segmentation of different lines of business. Figure 5.2 shows the demand for logistics
services from different lines of business. Numbers are based on averages per company of
a particular group multiplied by the number of companies in the respective group. This
gives total demand share per group. As can be seen, companies in the industry segment,
like car manufacturers, have a high demand for logistics services like just-in-time
delivery and international distribution. Also, other industries, like telecommunication and
information technology, have a growing demand, especially in the field of transportation.
Figure 5.3 shows revenues by yearly revenues of potential customers. The figure shows
revenues generated per profit group. Numbers are based on the average profit per
customer and the number of customers per profit group. As can be seen, customers in the
middle income bracket generate the highest revenue streams. High frequented low
income groups, such as small and medium companies, generate relatively low revenue
streams.
Business Plan For LEO & ANK Ltd Company 8
Business Plan For LEO & ANK Ltd Company 9

6. Marketing Plan
In the first phase, it is a central task of the marketing concept to establish name recognition
and a unique trade mark for LEO & ANK Ltd. Later on, the strategy will primarily be
targeted to gain new customers and create customer loyalty of repeat customers. Several
marketing and sales promotion strategies are available in the logistics industry. Figure 6.1
shows different marketing elements and their use in marketing strategies, as well as their
estimated potential success factor. The figure can serve as a direction for the planning of a
marketing and sales promotion strategy. The numbers are based on typical businesses in the
logistics and transportation industry. As can be seen, printed advertisements target a large
potential customer group, but at a relatively high cost. Printed advertisements in
international newspapers and magazines are regarded as very beneficial in the first phase to
attract a large group of potential customers and draw attention to the range of articles
offered. 49% of businesses in the trade industry use printed advertisements and about 60%
of this group regard this as the most beneficial form of marketing. Sales promotion strategies
have temporary effects only. They are used at business openings primarily and offer special
discounts. 49% of businesses use sales promotion strategies frequently and 81% of the users
responded that this instrument is successful. Marketing alliances with other trading
businesses to generate cost savings and increase efficiency are used rarely. Such strategies
include mutual use of marketing and web promotion events and joint promotion
arrangements. Only 45% of businesses have used these elements and 55% of these regard
this instrument as beneficial. Web and e-mail marketing is used frequently in the industry,
although this would be a relatively inexpensive additional effort. Direct mailings are a very
efficient strategy that sends mailings to selected customers or business groups. Since
spreading costs of such mailings are very low, this marketing element provides a useful tool
for special offer promotions.

The use of marketing and sales promotions proceeds as follows: as a broad base to attract
new customers, the strategy will include a combination of printed advertisements and special
offers with opening discounts. Furthermore, a group of customers will be selected for direct
mailings. This strategy is expected to continue for 3-4 months, after which the effort will turn
towards creating customer loyalty for regular customers. This strategy is supplemented by a
regular marketing strategy and direct mailings to regular customers. A marketing alliance
and online advertisements will also come to use.
Business Plan For LEO & ANK Ltd Company 10
Business Plan For LEO & ANK Ltd Company
11

7. Financial Plan
A sound financial plan is the key factor for the success of a business. Investors and banks
will base their funding decision on the information given in this plan. Besides a plan of the
financial needs, this plan must insure that the business is always liquid and ultimately
profitable. Since the sales and earnings projections in the business plan are based on
expectations, the financial plan has to be revised and refined on a constant basis so that
discrepancies can be uncovered and solved instantly. The inputs for this financial plan are
based on 22 businesses of different size and market segments in the national and
international logistics industry, which serve as a group of comparable firms, as well as own
estimates based on the planned business environment. Revenue estimates are conservative
and expense projections include a cushion for unforeseen contingencies.

The initial capital requirement for LEO & ANK Ltd is estimated to be £70,000. The sales
margin is expected to be 7-10%, whereby each business segment contributes differently to
sales and earnings. The classical logistics segment, of all segments, will have an average
contribution to sales in relative terms (6.5%), but given the high sales volume, the largest in
absolute terms. Revenues from transportation services can be differentiated into those from
low priced single services to comprehensive and long-term transportation. The sale of
services is expected to generate a 12% to 15% sales margin, while the margin from sales of
services is expected to be closer to about 10%. Figure 7.1 shows the source of revenues by
segment during the first phase.

Depending on the initial investment sum, cost and revenue estimates vary. Figure 7.2 shows
the expected relationship of cost and revenues. As can be seen, the relationship is not linear
everywhere, but costs decrease relative to sales at an initial investment of £70,000. This
effect is due to the better utilization of capacities in personnel at rising revenues at constant
cost. If capacity is fully utilized, additional personnel must be recruited. At an investment
sum of £100,000, administrative costs are expected to return to a linear relationship of sales.
At sales levels between £1,000,000 to £2,000,000, costs increase by the factor 1.85. The cost
revenue relationship is important, not only during the first phase, but also for planned further
expansion. Often such expansion strategies are based on this relationship. Other industries
are able to generate cost savings of 30-50% during expansion periods, while for the logistics
industry, this factor is close to 15%. At a specific size, this relationship reverses because
administrative costs rise sharply. This affects small businesses between 10 and 20
employees most severely.

The details of the financial plan are laid out in more detail as follows:

Section 7.1 gives an investments schedule. This includes all investments necessary during the
first phase.

Section 7.2 gives a break-even analysis that shows revenues at the break-even point. Every
additional sales revenue adds to profit and vice versa.

Section 7.3 gives a liquidity plan. This plan is based on current cost and revenue estimates
Business Plan For LEO & ANK Ltd Company
12

from Section 7.2. Liquidity must always be positive.

Section 7.4 contains a long-term profit projection for the first 4 years of business. The
projection shows the critical amount of revenues at which the business is profitable and how
profit develops over time.

Section 7.5 provides a risk analysis. The risk analysis contains critical factors that may
impact the financial numbers presented in this plan.

7.1 Investment Plan

The investment plan for comprises primary capital needs for the foundation and
operation of an international logistics company with different products and services for
sale. The plan also includes initial marketing and sales promotion expenses.

The figures are based on a business with 3-5 employees and expected revenues of
Business Plan For LEO & ANK Ltd Company
13

£950,000 in year 2-3.

7.2 Break-even Analysis

The break-even analysis shows how earnings rise as a function of sales. The break-even
point is the point at which revenues from sales cover total costs (fix costs and costs rising
with sales). This analysis is important for the development of the liquidity plan. If the
break-even point is not achieved, in the long run the business loses liquidity and may
become insolvent. This requires that a critical amount of revenues must be generated.

At a sale revenue of £600,000 and given fixed costs, the business will generate a profit.
Fixed costs are estimated at £120,000 to £130,000 and variable costs at £480,000.

At a realizable revenue of £1,000,000, after 2-3 years profits will rise to £70,000 pre-tax.
This represents an earnings margin of 10% pre-tax and 7% after-tax. These estimates are
realistic in this market segment. Increasing sales volume will increase pre-tax earnings
Business Plan For LEO & ANK Ltd Company
14

margins, but this development reverses when administrative costs begin to rise sharply.
Up to a sales volume of £3,000,000, earnings margins rise to 12.5%, after which the
margin decreases to constant 11.5%.

Figure 7.3 shows at which critical sales volume the business generates a profit. This
serves as a base for a pricing strategy. Additionally, the graph shows the amount of sales
at which a marketing campaign can be run profitably.

7.3 Liquidity Plan

The liquidity plan shows the amount of finances necessary to assure permanent liquidity
of the business. The plan is based on 4 representative months of a typical business with 3
to 5 employees, annual sales of £1,300,000 and net profits of about £300,000. Revenue
estimates are drawn from a standard normal distribution.
Business Plan For LEO & ANK Ltd Company
15

7.4 Earnings Plan

The earnings plan shows the results from ordinary operations. The plan is based on the
first 4 years of business. Revenue estimates are drawn from a normal distribution with an
estimated growth rate of 20 to 30%. Figure 7.4 shows profit over time.
Business Plan For LEO & ANK Ltd Company
16

7.5 Risk Analysis

The risk analysis considers critical factors that may lead to a failure of the business
concept. Such factors can involve failures during the implementation phase, as well as
during operations. Such potential factors are ordered according to the probability at
which they can arise. Shown is the key factor that led to the failure only. Data are drawn
from questionnaires of 10 logistics businesses with comparable product offerings and
revenue- and cost structures that went bankrupt during the last 3 years, as well as
analyses of different research institutes.

1. Insufficient demand: This is the most frequent reason that leads to business failure. This
includes permanently low demand, as well as a temporary collapse in demand. Often
demand estimates were too optimistic at the outset. Such failures might also come from
external shocks instead of operating deficiencies. 19% of businesses with insufficient
demand go bankrupt. 50% of these businesses report that, once demand slacked, they did
not react accordingly, because they believed that this phenomenon was only temporary.
Since the expected frequency of customers during the first phase is still low, a critical
success factor is to focus promotional effort so as to generate customer loyalty early on,
Business Plan For LEO & ANK Ltd Company
17

which will help minimize the effects of demand fluctuations. This is also important for
the future development of the business.

2. Behavior of Competition: Due to low entry barriers, additional businesses can enter the
market at low cost. Approximately 16% of insolvent businesses were driven out of the
market by that competition. A better service concept, innovative ideas and concentration
on core businesses are easy means for an entrant to gain a competitive edge.

3. Personnel and capacity utilization: Often personnel capacity cannot be adjusted easily
when demand slows down. Currently, business services have a capacity utilization rate of
personnel of 70%, i.e. 70% of employee working hours can be directly credited to sales.
At small businesses this value is often lower, which means that 30% of working hours
arise without generating any further revenue. 13% of such businesses go bankrupt for this
reason.

4. Liquidity constraints: Another frequent reasons for bankruptcy is insufficient liquidity. In

that case, it is possible that all liquid funds are used to cover losses or that liquidity needs
were planned too tight. To be able to flexibly react to changing liquidity needs, it is
important that sufficient funds be planned, even during the this phase. Thus, 5-10% of
the investment sum should be held as liquidity reserve permanently. 13% of insolvent
businesses reported liquidity as the reason for bankruptcy.

5. Over-indebtedness: Many business are run on a small equity base. The majority of
investments are funded by debt. If the business becomes unprofitable, debt obligations
cannot be covered. Little more over 10% of insolvent firms reported over-indebtedness as
the reason for going bankrupt. It is therefore important that a share of earnings is retained
for debt service.
6. Macroeconomic Conditions: In a cyclical downturn, revenue expectations may not come
in according to expectation. Although this factor does not affect the business in itself, it
does have an impact on profitability, liquidity and leverage. Costs remain constant during
such periods, but revenues typically decrease which affects overall profitability. 10% of
all insolvent businesses report that they went bankrupt due to macroeconomic conditions,
although the relevant indicators of the business looked healthy.

7. Location and market: The market of the business and the selection of the right potential
customers is an important success factor and one of the fundamental decisions that has an
impact on the future prosperity of the firm. Therefore, a careful analysis is necessary.
More than 10% of insolvent businesses reported that they went bankrupt because of the
wrong market selection. Often rebuild the businesses did not consider that, even when the
choice of market may not be wrong at the outset, it may later become so when economic
conditions worsen. This may be due to structural changes or different interest of
customers.

8. Wrong Business Decisions: Often wrong business decisions and difficult situations go
unnoticed for some period, which can lead to a failure of the business. A critical and
independent reflection of a decision are critical factors to determine the value of a
management decision and evaluate the business' profitability. Studies have shown that
Business Plan For LEO & ANK Ltd Company
18

many businesses fail in their rebuilding phase because of management’s inability to make
sound business decisions, while once a business is settled, such mistakes are very rare. A
critical management instrument is the ability to detect potential failures and problems.
Certain key figures can help measure this ability and objectively determine a decision's
chance for success. Small businesses should use such indicator ratios to assess their
business outlooks.

Figure 7.5 shows the relative importance of each factor for businesses that went bankrupt.
The numbers are based on the most relevant reason that triggered bankruptcy, but not the
reason responsible for bankruptcy. External factors that changed the competitive
environment and changing macroeconomic conditions were the most important reasons
relative to internal factors.
Business Plan For LEO & ANK Ltd Company
19

8. Conclusion
The international logistics segment is one of the most profitable within the business service
industry, while almost any other segment, especially in the local markets currently lives
through a difficult time. This situation is mostly driven by the competition of larger
international companies. A business that successfully survives the current temporary slow
down can be certain of increased profitability once the situation rebounds.

The relatively modest investment requirements and running costs (compared to industry
businesses) provide a favorable argument, since external funds from banks becomes more
difficult given that the risk aversion to finance such ventures has risen. LEO & ANK Ltd
with specific knowledge and innovative ideas has good chances to move into profitable
market niches and run a successful business. Market conditions change constantly, as do
customer demands. This is the chance for businesses with innovative ideas and new
offerings to secure a dependable customer basis. Service is a critical factor that can earn a
competitive edge.
This is also true for new trends in the industry to better control costs and increase efficiency.

For a successful operation of an international logistics company, five factors are critical and
central for the business strategy for LEO & ANK Ltd:

- In the international logistics industry, it is important that the customer experiences a

comprehensive and competent logistics service. This will secure customer loyalty in a
market that is very fast and competitive.

- The utilization of personnel capacity is critical for the long-term profitability because of
changing margins and the constraints to flexibly reduce personnel. Therefore, the additional
selling of transportation services is a further segment of the business that is integrated in the
sale of the whole business process.

- A carefully selected assortment of services, as well as the selected choice of new

technologies, has the potential to gain a competitive edge against competitors. Furthermore,
a service that aims to give the customer an added value through new services can justify
price mark-ups.

- A critical factor in the logistics industry is quality management. Better quality at lower cost
increases customer satisfaction. Deficiencies in service quality can lower demand, while
good service quality can help create customer loyalty.

- Cost management is a critical success factor for businesses in industries where margins are
low. Computer aided planning is an integral part of cost management.