American Management Technology will increase its sales by over $9 million within three years by focusing its strengths, key customers, and the fundamental values they require. This will allow American Management Technology to improve its gross margins on sales, cash management, working capital, and overall profitability.
This business plan shows the way. It renews the vision and strategic focus of our company: adding value in our local market to small businesses and high-end homeowners. It also provides step-by–step instructions for increasing sales, gross margin and profitability. To implement these changes, and increase profitability, we will borrow an additional $100,000 over the long-term. This amount seems to be within the limits of our balance sheet.
AMT was designed on the assumption of management of information technology for businesses being similar to legal advice, accounting, or other body of knowledge. Smart businesspeople need to find reliable vendors who can supply quality software, hardware, and support. These vendors must be trusted as well as their professional service providers. AMT is determined to address these needs and be the region’s leader in business IT.
AMT supplies both hardware and software to small businesses. We offer network services and systems for small and medium businesses. The systems are available in both minicomputer-server-based and PC-based networks. Our services include training, support, design and installation of network system, as well as training.
To achieve our goals, the following keys will be key to success in the next three-years:
- By offering support and service, and charging for it, you can distinguish yourself from price-oriented and box-pushing businesses.
- Increase gross margin to greater than 30%
- By the third-year, we plan to increase our non-hardware revenues to 20% of total sales.
AMT was founded as a consulting-oriented value added reseller (VAR), became a reseller to fill the market need for personal computers, and is emphasizing service and support to differentiate itself from price-oriented competitors.
We have one location–a 7,000 square foot store in a suburban shopping center located conveniently close to the downtown area. It also includes offices, offices and a showroom.
AMT is a privately-held C Corporation that is owned in majority by Ralph Jones, the founder and president. Six people are part owners of AMT, which includes four investors and two employees. 21 employees work under the supervision of the president and four managers. Our main management divisions are sales, marketing, service, and administration. The service department handles service requests, support, training, and development. Currently, our weakest area is in the technical capability to manage the database marketing program and upgraded support and service, particularly cross-platform networks. A training manager is also needed.
Recent changes in the computer reseller market have adversely affected AMT. These include margin squeezes and longer collection periods. All these concerns are part a wider trend that affects computer resellers. The margin squeeze is occurring in every sector of the computer industry.
The only way we can hope to differentiate well is to define the vision of the company to be an information technology ally to our clients. We will not be able competition with the chain that uses boxes or appliances. We must offer an alliance that is based on trust, reliability, and the assurance that someone will be there to help you in times of need.
We will be offering support services that help us capture market share, such as installation services, training, upgrades, service plans, and network configuration. The company will seek to aggressively pursue new opportunities.
AMT focuses on local market, small business, home office, and small business. AMT has a special focus for the high-end, home office and the small business office with 5-20 units.
The most recent study published retail sales increasing by 5% per year while web sales grow at 25% or 30 percent, respectively.
There are many types of computer retailers in the industry, including:
- Computer dealers are often limited to a small number of main brands of hardware and offer very little support and software.
Their service and support are generally not very good. Also, their prices are often higher than those at larger stores.
These direct competitors don’t offer the same level of customization and service as small businesses like our clients.
Small business buyers are more comfortable buying from vendors who visit their offices. They expect office equipment vendors, copy machine vendors, and office furniture sellers to come to their offices to do business. Many small businesses immediately go to superstores (office supplies, electronics, and office equipment) to get the best price. They don’t realize there is an even better option at a fraction more.
It is important to compete effectively against the notion that businesses should purchase computers as plug-in appliances and don’t require ongoing support, service, or training. The focus groups revealed that the target market for home offices does not care about price, but rather quality service. They are conditioned to think about the price of everything they see. We have very good indications that many would rather pay 10-20% more for a relationship with a long-term vendor providing back-up and quality service and support; they end up in the box-pusher channels because they aren’t aware of the alternatives.
We rely on newspaper advertising to reach new customers. However, as we shift strategies, we must also change the way that we market ourselves. We will be refocusing on our core message of service through radio, cable TV, sales brochures, direct mailers and newspapers. We need to sell the company, not the product. We sell AMT, not Apple or IBM, Hewlett-Packard and Compaq.
The Yearly Total Sales chart summarizes our ambitious sales forecast. Sales are expected to grow from $5.3 Million last year to more that $6 million next and to more then $9 million during the last year.
1.1 Objectives
- The third year saw sales surpass $9 million.
- Keep the gross margin at 30%.
- Selling $1.5 million worth of support, service, and training services by 1998
- Increase inventory turnover by 6 turns by 1998
Success: 1.2 Keys
- You can differentiate yourself from other price-oriented, box-pushing businesses by offering service and support and charging for it.
- Increase gross margin to greater than 30%
- Our non-hardware revenues will reach 20% of our total sales in the third fiscal year.
1.3 Mission
AMT is based upon the assumption that management of information technology in business is similar in nature to accounting and legal advice. Smart businesspeople who don’t consider themselves computer enthusiasts need to locate reliable suppliers of software, hardware, support, and services. They must use these vendors as trusted allies, just as they do their professional service providers.
AMT is such an entity. It is a trusted ally for its clients and provides the loyalty of a partner as well as the economics associated with outside vendors. We make sure our clients have everything they need to run their business as efficiently as possible. Our clients can trust that we will always be available to help them with their information applications.