I am working on my group project for the class teaching by prof. Karen Kukla. My group chose the business EduXperience .

There are 3 part of the project: and I need help for question 2. Description of operations and transaction cycles .Please see the attachment

Thank you

Presented by: Brooks Fiesinger & Alicia Fiesinger 4/9/2008 Table Of Contents Executive Summary ----------------------------------------------------------------------------------------------------- page 4 I. The Industry ------------------------------------------------------------------------------------------------------------ page 6 II. The Company, Concept, and Product/Services---------------------------------------------------------------- page 8 A. The Company and the Concept------------------------------------------------------------------------- page 8 B. The Product/Services------------------------------------------------------------------------------------- page 8 C. Entry and Growth Strategy------------------------------------------------------------------------------ page 11 III. Market Research and Analysis----------------------------------------------------------------------------------- page 12 A. Definition of Your Relevant Market and Customer Overview---------------------------------- page 12 B. Market Size and Trends---------------------------------------------------------------------------------- page 13 C. Buyer Demographics and Buyer Behavior----------------------------------------------------------- page 13 D. Market Segmentation and Targeting----------------------------------------------------------------- page 15 E. Competition and Competitive Edges----------------------------------------------------------------- page 16 F. Estimated Market Share and Sales Figures---------------------------------------------------------- page 20 G. Ongoing Market Evaluation----------------------------------------------------------------------------- page 22 IV. The Economics of the Business---------------------------------------------------------------------------------- page 23 A. Revenue Sources and Gross and Operating Margins--------------------------------------------- page 23 B. Fixed and Variable Costs--------------------------------------------------------------------------------- page 23 C. Operating Leverage and its Implications------------------------------------------------------------- page 24 D. Breakeven Chart and Calculation---------------------------------------------------------------------- page 25 E. Overall Economic Model--------------------------------------------------------------------------------- page 26 F. Start-up Costs----------------------------------------------------------------------------------------------- page 27 G. Profit Potential and Durability-------------------------------------------------------------------------- page 27 V. The Marketing Plan-------------------------------------------------------------------------------------------------- page 27 A. Overall Marketing Strategy----------------------------------------------------------------------------- page 27 B. Pricing-------------------------------------------------------------------------------------------------------- page 28 C. The Selling Cycle------------------------------------------------------------------------------------------- page 28 D. Advertising and Sales Promotions-------------------------------------------------------------------- page 29 E. Publicity------------------------------------------------------------------------------------------------------ page 29 F. Customer Service------------------------------------------------------------------------------------------ page 30 G. Distribution------------------------------------------------------------------------------------------------- page 30 VI. Operations Plan------------------------------------------------------------------------------------------------------ page 30 A. Operating Model and Cycle----------------------------------------------------------------------------- page 30 B. Geographic Location and Physical Location Requirements------------------------------------- page 30 C. Facilities and Equipment Requirements------------------------------------------------------------- page 31 D. Operations Strategy and Plans-------------------------------------------------------------------------- page 31 E. Legal Issues Affecting Operations---------------------------------------------------------------------- page 31 F. Projected Development Costs--------------------------------------------------------------------------- page 32 G. Proprietary Issues------------------------------------------------------------------------------------------ page 32 VII. Management Team------------------------------------------------------------------------------------------------- page 32 A. Organization Structure----------------------------------------------------------------------------------- page 32 B. Key Management Personnel and Responsibilities------------------------------------------------- page 33 2|P age C. Management Compensation and Ownership------------------------------------------------------- page 33 D. Other Current Investors---------------------------------------------------------------------------------- page 34 E. Board of Directors------------------------------------------------------------------------------------------ page 34 F. Board of Advisors------------------------------------------------------------------------------------------- page 34 VIII. Overall Schedule---------------------------------------------------------------------------------------------------- page 34 IX. Critical Risks, Problems and Assumptions---------------------------------------------------------------------- page 35 A. Critical Assumptions--------------------------------------------------------------------------------------- page 35 B. Critical Risks------------------------------------------------------------------------------------------------- page 35 X. Financial Plan---------------------------------------------------------------------------------------------------------- page 36 A. Pro Forma Income Statements------------------------------------------------------------------------- page 36 B. Pro Forma Balance Statements------------------------------------------------------------------------- page 36 C. Pro Forma Cash Flow Analysis-------------------------------------------------------------------------- page 36 D. Months to Breakeven and to Positive Cash Flow-------------------------------------------------- page 36 E. Cost Control------------------------------------------------------------------------------------------------- page 36 F. Highlights of the Financial Statements---------------------------------------------------------------- page 36 XI. Proposed Company Offering-------------------------------------------------------------------------------------- page 37 A. Desired Financing------------------------------------------------------------------------------------------ page 37 B. Valuation----------------------------------------------------------------------------------------------------- page 37 C. Offering------------------------------------------------------------------------------------------------------- page 38 D. Capitalization----------------------------------------------------------------------------------------------- page 38 E. Use of Funds------------------------------------------------------------------------------------------------- page 38 F. Investor's Return------------------------------------------------------------------------------------------- page 38 Bibliography--------------------------------------------------------------------------------------------------------------- page 39 Appendices----------------------------------------------------------------------------------------------------- ----------- page 41 3|P age EXECUTIVE SUMMARY Homeschool Education is currently a 2.2 million student market, with another million involved parents, growing at a rate close to 15 percent per year. At this time, there are no direct national players serving the needs of this market, even though members of the market are active in voicing their interests and needs. The market size and technology have both evolved to a point that the needs of homeschool families can be met, bringing the benefits of both public and private schooling, as well as, the growing interest in experiential education to this market. EduXperience is a full-service online portal solution that creates a forum for networking, knowledge sharing, and economies of scale to homeschool families. Currently there are numerous small companies run by individual parents that attempt to offer things such as lesson plans and knowledge trading. Unfortunately, with so many small players, it is very difficult for sellers to reach their audience, and it is very difficult for the customers to pick quality offerings. EduXperience will offer both an online rating system, categorizing system, and forum for the distribution and sharing of this knowledge, working with the small players in the market. In addition, EduXperience will bring the experiential component to the homeschool families by offering enhanced services, licensed tutors and teachers, clubs, organizations, athletics, speaker series, and experiential travel opportunities. All of these offerings will be supplied through an interactive online portal, working off of a social-networking style base. This venture solves many of the problems associated with home school education and offers an enhanced experience that supports the rationale for parents to homeschool in the first place. The homeschool market is increasing and expanding as parents want to take advantage of the higher test scores and improved education homeschooling offers. The large infrastructure requirement, as well as the reputation-based interest of home school customers will offer barriers to entry against competition. The emerging market has many small players, while a few large players from other industries play a small role. Our price competitive products will be focused to this niche market, offering a better array of services, more in tune with the needs of the customers. The market is not quite large enough to command substantial interest from the big players, but the market will double in four and a half years. Once the market is large enough to bring in interest from outside players, EduXperience will already be a market leader with a strong brand recognition and customer loyalty. The margins will be too small in the distinct markets for competitors to be drawn to compete, as substantial profits will be made in support products and advertising. The initial market for EduXperience is students and parents of dual-parent homeschooling households with an income over $40,000, active in the enhancement of homeschool education. Customers will include students, parents, as well as a Business-to-Business (B2B) component geared towards advertisers interested in reaching these prime advertising targets, as well as school and government customers. The initial Business-toConsumer (B2C) market is approximately 650,000 people, and expanding drastically, increasing at least 15 percent per year. A majority of the parents in this target market specifically chose to homeschool their children for the enhanced educational benefits. Forums and interviews with homeschool parents show they are desperately looking for ways to save time and money, as well as ways to offer better educational services to their children. 4|P age The basic marketing strategy will be to pull in students, as well as parents, through free and low cost products such as social networking, clubs, and peer-to-peer homeschool supply sales. The strategy will then be to move them to higher margin products once they are involved with EduXperience. Initially, the goal will be awareness, mainly through online advertising and attendance at conferences, which will expand to personal selling and peer-to-peer grassroots/word-of-mouth marketing. Reputation is essential for this market; therefore, the name must maintain untainted until it gains widespread appeal. Pricing will range from low cost (peer-to-peer) to pricing similar to competitive offerings (business-toconsumer). Some enhanced products will be more expensive (such as Foreign Language Education through certified as well as native teachers), but expanded offerings will be available. The distribution, with an exception of advertising, will be purely online. The online portal will be developed specifically for this homeschool application. It will be all-inclusive and developed through the use of both team programmers and independent contractors. Production of products such as clothing items will be completely outsourced. Most product offerings will be built into the system, allowing it to be self-contained and automatic, offering less backend operations for EduXperience, and also offering instant delivery to the customers. Our team involves highly experienced managers with expertise in Education, Online Technology, and Business startups. The Board of Directors includes a newly educated teacher, a retired teacher, a 30 year international manager from a Fortune 50 company, and an entrepreneur who has already created two businesses, and has experiences consulting with other startups. The Board of Directors will be advised by a board of Executives made up of some of the top companies in the nation, an Ernst & Young \"Entrepreneur of the Year\" Award recipient, and a lawyer/entrepreneur. The cost structure is largely fixed, but with a relatively quick payoff. Margins vary from 2 percent for support products to 90 percent for advertiser-based products. Revenue will come from an extensive line of revenue drivers that round out a wholistic approach to homeschool education. Breakeven will be achieved in three years, with multimillion dollar profits by year four. This is a fairly quick growth industry, so profits are expected to grow substantially. EduXperience will require $750,000 in investor capital, and $250,000 from an SBA backed loan. We are looking to offer a 20 percent share of the company away to angel investors to acquire this capital. It will be paid back through a company buy-back at year five, or through an acquisition during the same time period, dependent on a re-evaluation of the market growth potential. 5|P age I. THE INDUSTRY The Application Service Providers (ASP) Industry is one of the most recently developed industries, emerging around 1998. The entire industry crashed with the dot.com bust in 2000, causing a slowdown in industry development which has recently begun to regain momentum. The idea behind ASPs is to host software online, which initially only offered licensed downloads and has now developed into also including online applications. Other names of the industry include \"On Demand Software\" and \"SaaS: Software as a Service.\" This industry is currently near seven billion dollars, and is expected to grow to almost $20 billion by 2011, reflecting a growth rate just over 30 percent. The ASP Industry is complicated, as customers and even providers have trouble defining the industry. There is a lot of grey area between ASPs and physical software offerings, which is typical in an emerging industry. The industry contains markets and products ranging from online e-mail services and online portals to complex custom tailored ERP (Enterprise Resource Planning) systems. Commonly, ASPs are located in the World Wide Web, but they are often found on private networks over a variety of mediums (Application Service Providers). The ASP market is growing at a relatively quick rate, and the main trend is an increased spread. Some offerings are becoming free, such as Google products and web mail, while other offerings including some ERP systems are costing millions of dollars for users. Much of the pricing trends are market specific, as the industry is in emergence. The ASP Industry consists of NAICS codes 541511, 511210, and 518210: \"Custom Computer Programming Services,\" \"Software Publishers\" and \"Data Processing, Hosing and Related Services,\" respectively. Currently, there is very little rivalry, as there is enough room to grow that ventures are growing into various unique segments by the mismatched and fragmented industry players. There are few barriers to entry, with an exception of high costs associated with ASP Product Developments and relative brand identity, but only through non-ASP industry correlation. Supplier power is low, as ASPs are on the backbone of the low-cost, high availability computer and server hardware systems. Buyer power is very high with ASPs, but buyers tend to turn to them for their lower cost, ease of use and increased flexibility over actual purchased software. Low Supplier Power Medium Barriers to Entry Low Rivalry Medium Threat of Substitutes High Buyer Power 6|P age The ASP Market is somewhat of a unique industry. While there are several major players, most players come from other industries and develop ASPs specific to another compliment industry. The success of the ASP's are directly dependent on the market and their ability to fit market needs. In many situations, such as with Facebook and Myspace, it is essential for the ASPs to build up hype during brand building efforts. In our case, the other industry our ASP will be riding is the Youth Education Industry. Youth Education is a large industry, with the United States law requiring every child to be a part of the industry beginning sometime between the ages of 4 and 7 (depending on state) until the age of 18 or high school graduation, with rare exceptions (Illinois General Assembly). The industry currently serves 52,967,443 school-aged children (ages 5 to 19) in the United States, as well as their parents and teachers. The Industry is a mix of public and private areas, including government- funded public schools, privately funded schools, religious schools, charter schools, online internet based schools, home schools, and other similar institutions, as well as, the main support areas such as school supplies, extracurricular equipment, merchandise, and tutoring (Business & Company Resource Center, 2008).The industry includes Elementary and Secondary Schools (NAICS code 611110), Exam Preparation and Tutoring (NAICS code 611691) Administration of Education Programs (NAICS code 923110) and Educational Support Services (NAICS code 611710) (U.S. Census Bureau, 2007). The industry size is approximately $565 billion per year with a little over $517 billion spent by Federal, State and City governments, (Business & Company Resource Center, 2008) $68.6 billion of which was spent by the U.S. Department of Education (Budget Office-- U.S. Department of Education, 2008) alone. $26 billion is spent on private services, and $10 billion is spent on homeschooling while $2 billion is put toward supplies. The market grows at approximately the rate the population is increasing, .96 percent currently. This is expected to slow closer to .54 percent over the next 50 years based on US Census estimates (U.S. Census Bureau, 2007). However, the National Center for Education statistics states public school enrollment will increase five percent by 2013, and private schools will increase seven percent. While the industry as a whole has been around longer than the United States, the support services and differentiated areas of profitable private schools and large scale national tutoring is an emerging area of the industry. This is especially true as security, safety, and quality concerns, as well as increased competition for top performance among students has begun a trend towards private services. The companies that succeed in this industry are those who are able to capitalize on the slow movement of the government, or to fill in the areas in which the public school systems fail to accommodate. This includes companies such as Sylvan and Kaplan who offer tutoring and test preparation to private schools as well as public schools. Those who fail in the industry tend to fail to innovate, or take advantage of economies of scale. 7|P age II. THE COMPANY, CONCEPT AND PRODUCT/SERVICES A. The Company and the Concept EduXperience is a homeschool-focused portal serving growing areas of need in the Youth Education industry through the Application Service Provider Industry. It will be formed as a corporation, initially electing for S-Corp status allowing pass through profits until scale makes the corporation ineligible for Subchapter S status. The company is to be headquartered in Indianapolis, Indiana, taking advantage of the central location, and strong Midwestern values, as well as its business-favorable tax and law climate, and its support of homeschool education. EduXperience will formally begin operations June, 2008. At this time the infrastructure will be built and tested. Public launch of the product will commence March, 2009, when local homeschool conferences are taking place. Full service offerings are to be provided starting with the 2009-2010 school year. The concept behind EduXperience emerged as Brooks Fiesinger played Ultimate Frisbee against a team of all homeschooled students. Talking to the students, he discovered this was the first real opportunity they had to meet and network with like-minded individuals. At this time he realized there was this need, and while there were small parent-run organizations covering some local areas, there were no inclusive organizations offering the networking component to the students. Further research showed that homeschooling was rapidly growing, but there were a few key complaints with the homeschool option. Fiesinger realized these issues could be resolved through a national solution that would actually save time, money, and effort for all involved. The future growth of the market area made it clear there was a lot of potential in this area. EduXperience provides the ultimate Educational Experience. It does so through experiential opportunities, networking, and enhanced educational services for homeschool families, an emerging and rapidly growing market. Now more than ever, people are recognizing the need for experiential learning, giving students more real-life experience in an educational world. EduXperience offers a full solution for enhanced education, merging the benefits of public, private, and homeschooling in preparation to future industry changes. It does so through unique offerings set forth in (II. B.) below. EduXperience is owned largely by the umbrella corporation, Paranoid Production Designs Inc. Paranoid Production Designs Inc. is a Venture Development and Consulting company out of Cincinnati, Ohio who will provide part of the initial funding and resource support to EduXperience, as well as managerial assistance and resource sharing opportunities. B. The Product/Services EduXperience will initially offer five product and service lines, each with a unique source of revenue. These include Advertising, Clubs/Organizations, Travel and Trips, Lesson Plans, Online Teaching, and Supplemental Offerings. Most of these offerings are infrastructure based peer-to-peer, similar to the model used by companies such as Ebay, Paypal, and You Tube which design a medium for individuals to share or sell their information. Over the course of the next five years, EduXperience will begin the introduction of three additional product and service lines, pulling together seven sources of revenue. Each 8|P age of these lines work together from the same infrastructure system, allowing them to support each other. This will be a predominant source of a barrier to entry, as once a user signs up for one of our services, it will make it easier and faster to utilize our services than mixing and matching with other competitors. Below are our product lines, products, and implementation times. Conferences Advertising Clubs/orgs Travel/Trips Lesson Plans Games Online Teaching Supplement Offerings National Student Social Network Free (Social) National Share Advertising Connect People Pen Pals State Adult Social network Parent Groups State Premade Written Sponsored Games Foreign Language Homeschool Management Software for Schools Professional Teachers Online Homeschool Application System General Info Advertising Social Network (Alumni) General Sponsorships Pay to Join (Financed) Athletics International Local area Premade Visual/Audio Purchasable Games Online Speaker Series Recorded Lessons Clothing Diplomas (Faux) Key: Initial Offerings Introduced over first two years Introduced over years two to five Introduced in years 5+ The infrastructure will be an online portal allowing users to network and connect with other homeschool students and families across the nation. The social networking will be advertiser supported so the product can be offered free of charge. This will help get customers in front of our other products, increasing awareness, and will also get customers bringing others into the system. To offer key benefits of public and private schools, we will offer clubs and organizations ranging from regional student governments to yearbooks, foreign language clubs and science clubs. These will be arranged for different ages and will have parent \"advisors,\" while being student-run, allowing homeschooled students to develop networks and build leadership experience. Athletics will also be offered, allowing homeschooled students to take advantage of competition against public and private schools as well as other homeschool teams. For most parents, many friendships are formed through their children's friendships made at school. This can be difficult for homeschooling parents who do not have the opportunity to make friends at work or 9|P age through their child. We will offer networks for parents, giving them a place to meet other parents, ask questions, share knowledge and information, as well as to arrange groups, meetings, and events. Education will be expanded through travel experiences locally, at the state level, nationally, and internationally allowing homeschooled students to experience many of the areas they study. These trips will be fully planned and guided by our staff, and will be designed to offer an exceptional experience to both the students and the parent, individually and together. Daytime activities will be designed as an educational experience for both parties. Evenings will offer \"parent only\" events allowing them to network and relax, while \"student\" events will be chaperoned by our staff. Lesson plans will be offered in several formats. Initially they will be shared between parents. A parent can list a lesson plan or a collection of lesson plans for a price they choose. They simply list everything online, similar to an Ebay auction, but without an \"end time\". After it is listed, they do not need to think about it or touch it. Other parents can browse samples of the lesson plans and purchase them for this price. When they make a purchase, they will have instant access to the lesson plan, and EduXperience will make a portion of each sale as commission. We anticipate individual lesson plans to cost between a few dollars for a single lesson, $10 for a unit plan, and $40 for an entire year of plans for a particular subject. EduXperience will begin introducing premade lesson plans in both written and audio/visual form, made by licensed teachers and extensively experienced individuals. For example, we may have a NASA engineer design a unit about space, or a government agency design a lesson plan on government. These will be sold through our website portal. Games focused on both educational and non-educational aspects will be distributed through the portal and will include downloadable games as well as games that can be played right on the website. Initially these games will be basic educational tools such as hangman, tic-tac-toe, word games, and spelling and Math games. Over time, more advanced games will be developed both in-house and distributed from other manufacturers. Actual online teaching will be a strong cornerstone of our overall experiential offering. Not every parent has the expertise needed for every subject; however, some do have expertise in one area. This will allow parents to \"trade\" their expertise for another, teaching students beyond their own, based on their knowledge. Parent-teachers and students will log into a virtual classroom equipped with written, audio, and video capabilities allowing for optimal interaction between teacher and student. Parent-teachers will have the capability to play short video and audio clips, along with other technology on the forefront, while working through their unique lesson plan. The hour lessons will be available as one-to-one sessions or with multiple students. This gives students an opportunity to experience the knowledge that others hold, closing the gap in personal knowledge and increasing the experiential component of education. Licensed teachers will also be available for specific lessons, courses, and tutoring. Parents can pay for tutoring by the hour, or hire teachers to teach individual or groups of students to cover a range of topics. One area EduXperience will focus a lot of attention to is Foreign Language. Very few parents have the knowledge and language skills to teach a foreign language, and it is not something easily taught through textbooks and videocassettes. Online Foreign Language classes will be taught by certified licensed teachers 10 | P a g e and will include two-way written, visual, and audio communication. Teachers will teach classes in small groups and also offer tutoring. Advanced courses will be taught by native speakers of the respective languages. The infrastructure of EduXperience will allow teachers to teach even from the foreign countries themselves, making this expertise easier and cheaper to obtain than through traditional education sources, while drastically enhancing the students' experiences. Teachers will also record lessons, which can be displayed and purchased on demand by homeschooling parents. These lessons will help complement parents and also help with advanced topics that parents may not have experienced before, such as advanced mathematics, sciences, and specialty courses. This product line will also allow online speakers, where homeschooled students can interact with speakers across the country, including entrepreneurs, government officials, engineers, astronauts, and other experts in their industries. This will allow students to ask questions and receive two-way communication typically only afforded to large groups of public and private school students. School pride items, similar to those of public and private schools, including branded merchandise, shirts, hats, jerseys, paperwork, grade reports, and even diplomas will be offered, giving the feeling of traditional schools. \"Schools\" will ultimately be regional based, allowing students to have an element of school pride and competition. This line will have a larger margin than other lines, but will not see the same quantity of other lines. An online homeschool application system will be included as well. This service is similar to offerings such as \"LegalZoom.com,\" and will allow parents interested in homeschooling to fill out a form on our website with payment, and we will handle all the forms and submissions to the state and local schools (where applicable). Many homeschool parents have difficulty figuring out what needs to be submitted in each state. The EduXperience online homeschool application will make it quick and easy to submit this required data. Once market share is acquired and the name gains recognition, EduXperience will launch national conferences while branding the already formed state-level conferences. This will provide a forum for pulling together the smaller components of the overall experience and increase the location-based school pride components, as well as enhancing networking components, clubs and organizations, and travel/trips. Finally, Homeschool Management Software for Schools will be introduced. This system will easily interface with our online homeschool application system. Schools will be able to utilize this system to track and manage homeschool families in their school district and will also be offered to states to track homeschool information across the state. It will allow the school districts to accept data through an online portal and also enter data themselves. However, it will maintain all the required information, be indexable, and downloadable in numerous formats such as Excel and Access. C. Entry and Growth Strategy Entry to the industry will be achieved through local homeschool conferences. Joining is free, and we will begin by appealing to the students, offering a \"homeschool only\" social networking option. As part of the 11 | P a g e sign up process, students under the age of 13 must have their parents register as well. This allows us to pull the parents in, getting them involved in networking information sharing. It is this information sharing such as lesson plans, sharing knowledge through online teaching and conferences, as well as online speaker series which will bring in revenue and grow our name as a valuable, quality, homeschool asset. Growth will come through continued appearances at homeschooling conferences, homeschool magazine marketing, and most importantly, through our networking component. Users will connect to friends, family and acquaintances, both students and parents, creating an extensive national network of users. These users will begin taking advantage of our other product line offerings. Once we gain name recognition, we will sell ourselves for our educational offerings, expanding into the new emerging markets such as online education, national field trip offerings, lesson plan sales, and public-school like offerings such as sports, clubs, and events. Initially EduXperience will be nationally focused, but as numbers increase, it will be broken into regional \"conferences\" and smaller \"districts.\" Each district will have a name, mascot, and will operate sports and organizations as well as events similarly to a traditional school. Additional product lines will be introduced (as shown in B above) to existing customers. Once substantial market share is controlled, attention will focus on increasing the number of homeschool families across the country. We will play off of the safety and security fears of public school systems, while offering numerous benefits attributed to the forward thinking national EduXperience solution. International growth will begin in Canada in 2010, following a similar strategy as domestic growth, but redefining the educational structure to Canadian laws and culture. Western Europe, Japan, Australia will not be denied service, but customized offerings in line with local rules and regulations will not emerge until 2012. US cultural experience will be offered to Indian and Chinese markets in 2012 as well. Pressure on Chinese and Indian lawmakers will begin in 2013, and emergence into these two markets is planned for 2015. Using the scale of the company as soon as the markets become available will enable EduXperience to lock up these markets from further competition. EduXperience will rebrand itself for each of these markets as a local domestic company, as each of these markets prefer domestic to international companies. III. MARKET RESEARCH AND ANALYSIS A. Definition of Your Relevant Market and Customer Overview The relevant market for EduXperience is initially students and parents of dual-parent homeschooling households with an income over $40,000 active in the enhancement of homeschool education. There are two customers from this market, the first of which is the actual parents and students in this market. These customers are Business-to-Consumer. The second customer is the companies that currently serve this market, as these customers will be purchasing advertising from us. These customers are Business-toBusiness. Both customers come from around the country, but can be targeted at the regional conferences currently in existence. 12 | P a g e B. Market Size and Trends The market size for EduXperience is initially approximately 672,000 individuals, spending at least $319 Million per year on education, but seemingly willing to spend more. There are approximately 2.2 million home schooled students in the United States (The World Factbook). Much higher than the national average, 87 percent of these families are married families with two-parents (Facts on Homeschooling). Each family averages 3 children (ED.GOV), averaging 1.37 million parents involved with the homeschool students. This means there are 3.57 million people directly involved with homeschooling in the United States. Of this large market, about 3.2 million are part of a dual-parent household, and 2.4 million are part of families with a household income of $40,000 or more per year. It is estimated that 28 percent of these are extensively active in the enhancement of homeschool education. The initial market will be 672,000 individuals across the United States. This homeschool market is growing tremendously. Homeschooling is the fastest growing educational segment, estimated to be growing at a minimum of 7 to 12 percent per year (Facts on Homeschooling). This rate of increase is growing as well, with some estimates suggesting it is already to 15-20%. In addition to the growth of the entire homeschool market, those becoming active in the enhancement of homeschool education is growing at an even higher rate, with conference attendance and political activism in the fields of homeschooling growing closer to 15 percent per year. For these reasons, we project that our market will actually double in four years. Legislative changes and offerings such as EduXperience could potentially increase this growth rate substantially. There is also a backlash trend against the \"teaching to the test\" trend the public school systems are currently recognized for. One other trend is towards performance for University and the job market. With this trend hitting public and private schools, the fact that the average homeschooled student scores 37 percent better than the average public school student on national tests pulls families to the homeschool education model (Home Schooling Achievement, 2008). Currently 50 percent of homeschool families do so because they feel they can offer a better education at home than public or private school systems (Thomas E. Woods, 2008). Some industry experts even suggest that the entire education system will be online within 50 years, making this a solid growth market that may experience drastic waves of influx in the future. Capturing market share early is essential for success in this market. C. Buyer Demographics and Buyer Behavior Purchasing decisions for business-to-consumer will be made by the parents, the 28 to 45 age users. The strategy is based on making offerings to the parents directly, and also to the students, through what we recognize as the cereal box strategy: Make students want the product and convince the parents to pay for it. Evident from numerous online discussion boards, homeschool parents are actively searching for options to improve educational quality, lower cost, and improve ease of use. The student users are likely to log in and try it if friends are involved. If they like it, they will continue to use it; parents are similar. If they view it as reputable and a quality product, that really will improve the quality of education and/or lower costs and improve ease of use, they will give the product a try. If it lived up to expectations, these parents will likely re-use the product. Parents are likely to share \"finds\" they 13 | P a g e have with others. Our product must be solid. If it is, then they will recommend it to others, and it will gain dominance. If the product is referred to a parent, they are likely to give it a try, repeating the cycle. The student and parent involvement in the networking aspect will assist in getting each party \"hooked\" to the portal, which will increase the potential for success in other areas. Many high-margin purchases will be on a whim, while involvement will be a longer process. Business-to-consumer buyers are likely to follow this buying process: Awareness Research Through advertisements Through Friend Recommendatio ns Through conferences Online Recommendations from friends Trial and usage of free services In cases of referrals, paid services may be the initial trial Purchase of goods or services Repurchase and Re-use of EduXperience offerings The purchasing decisions for the business-to-business market depend on the sub-sections of this base. Small companies, common in the home school market, will make this decision based on the executive marketing vice president or the business owner. Larger marketing firms will have teams deciding the marketing and advertising strategy at this time, until a long term buying process is established by the industry. Based on personal interviews with Robin Koval, founding partner of the Kaplan Thaler Group Advertising and Marketing Agency, and Jackie Bassett, President of BT Industrials, the buyer process for online advertising has not yet been established. Kerry Bodine, a research analyst at Forrester said \"There's so much interactive work now that agencies are actively turning away 90% of RFPs that come into the door.\" Bassett also said the digital crunch has become a drag on the overall industry. It is imperative to create an opportunity which will draw this audience to seek us out, through a pull-style strategy. This concept is currently successful with Facebook, which is also going on an advertising drive of their own, pushing this advertising technique. Advertisers are already available through software such as Google Adwords. Once it is clear that money is available through this avenue, advertisers can use our advertising portals and bid for the advertising spots, which will raise the cost of advertising and offer the advanced targeting method. It is essential however to keep processing information on the advertising buying processes for online advertising. Both business-to-business markets are a longer buying process than individual buyers. Small businesses are likely to test with smaller advertising orders and then expand to larger ones. Personal relationships are key, and long term relationships emerge, meaning the selling process must begin, but continue even after an initial contract or agreement. Large businesses are likely to use our services as part of a web marketing budget and may make the decision in as short as several weeks. Larger advertising investments may take between 3 and 6 months. Once an advertiser chooses to use this medium, they are likely to use this service again. For this reason, the selling process must be highly flexible to handle both of these situations. 14 | P a g e Based on a personal interview with Megan Pangborn, a seven-year marketer for Ogilvy & Mather, J Walter Thompson, and Cramer Krasselt, the buying process has been determined for most large advertising companies. Advertising companies receive a budget and brief from their clients, as well as their target audiences. They determine, based on the research from their research analysts, the best fit for their advertising needs. The media planners negotiate with the representatives of the medium they choose and run their advertisements through that medium. If they are pleased with the outcome, and it still appears to be the best fit for the company, they will continue with a longer term commitment. Business-to-business buyers are likely to follow this buying process: Awareness of Medium Research Analysts Evaluate Data stored Trial Media Planners choose medium for client Data Accessed by Media Planners Re-Assessment of mediums Long Term Commitment D. Market Segmentation and Targeting The first customer base is a business-to-consumer model and is split into two distinct components. One component is the students, mainly ages 8 to 18, which will have offering tweaks for subcomponents based on age, with one online model geared to the unique needs and security requirements, as well as legal restrictions surrounding 8 to12 year old students. Ages 13 to 18 will have more freedom as this group demands. These users are interested in social networking, as well as gaming. They will also be interested in athletics and competition. The second component is parents, specifically ages 28 to 45. This is broken down further into 28-35, and 36-45. The 28-35 age group is part of the internet generation, and are more likely to be heavily involved with internet usage. The 36-45 age group is less likely to rely on internet usage (PEW Internet). These users require more usable software, as many do not have the tech-savvy knowledgebase the younger students and parents acquire. This age will shift each year, as the older group gains internet-savvy generations. This customer base is more interested in easy networking, time saving information and products, as well as components to enhance the education of their children. Further segmentation is broken down into the 66 percent not interested in religious experiences, and the 34 percent of these parents who are largely interested in the ability to integrate religion into the curriculum, which is an area that will need to be addressed when working with this customer segment. The focus of the entire parent audience will be enhanced education and enhanced experiences, as well as opportunities to save time and money. Our 15 | P a g e Homeschool Education Survey (Appendix 13) discovered these were the biggest problems homeschool parents currently deal with. The second customer base is business-to-business in the form of advertising and sponsorships. This customer base is segmented into three main areas. The first of which is large advertising firms such as WPP Group, Publicis, Interpublic Group, as well as individual companies such as Ogilvy & Mather and J Walter Thompson. The second two are small advertising firms and direct businesses and individuals. These customers are seeking a way to target advertising attempts at specific ages and interests. Both product audiences are areas that advertisers have a lot of difficulty reaching and are both very valuable markets for advertisers. Due to the information contained through the social networking aspect, which will include ages, locations, sex, education level, as well as interests ranging from activities to types of music and choice of foods and games, EduXperience will be able to target advertising directly at the people advertisers want to get a specific message to. This will allow us to command higher prices for more efficient advertising. This is proving to be a very effective strategy, as evident through the success of Google Adwords. Unlike Adwords however, we will have more information and more customized options for these advertisers, allowing the message to be focused purely on the people they choose. Market Segments and Targeting (Main Targets) Students Parents Age 8-12 28-35 Religious Focused Not Religious Focused 36-45 Age 13-18 Religious Focused Not Religious Focused Alumni (18+) Advertisers Government Large Advertising Firms State Departments of Education Small Advertising Firms Local School Districts Individuals & Individual Businesses E. Competition and Competitive Edges Currently there are no major national players capitalizing on this tremendous market size. There are three main levels of key competition and one group of substitutes. Level one competition, our biggest competitors, are going to be small to medium-sized homeschool websites including Homeschool.com, 3Dlearn.com and Tutor.com. Several of these competitors focus in other industries, such as tutoring and support, but offer some specialized services to homeschoolers. Many homeschool websites are run by individual homeschooling parents and offer trips, lesson plans and other services on a small-scale level. A popular website, Rainbow Resource Center is an online family-based resource center where homeschool parents can go to purchase a variety of books to enhance their child's educational experiences. Finally, with so many players in this market, it takes significant effort to seek out reputable products online. Our product allows these same players to sell their offerings, but allows them to categorize their product and have buyers offer feedback to the quality of the product. Our customers will use this for its 16 | P a g e security and ease of use, similar to the way Ebay capitalized off of the online personal sales. Our other offerings will capitalize off of the large audience brought to our portal for this functionality and will offer higher quality product for a premium price to compliment the peer-to-peer provided product. Our model allows us to capitalize off of the skills and abilities of the smaller players, while packaging this up in a more reliable, usable function for customers. Local and State level homeschool conferences will also be a part of level one competition, but not as much of a player as the websites. Currently, homeschool conferences are put on by groups of parents, not a specific company and they are not nationally recognized. EduXperience aims to gain initial recognition through these conferences while branding them with the EduXperience name. From this, expansion to national conferences is expected, giving homeschool parents across the United States a chance to meet and network with each other. Level two players include social networking websites such as Facebook, MyYearbook, and MySpace as large players for young adult networking. These players are large and powerful, with lots of support and a strong reputation. With no focus in education however, these players will have little or no focus in the target audience. These companies would require extensive investment to implement the strict requirements for users under 13, and this is too small of a market for their strategy to compete against EduXperience, as the social networking aspect is not the major source of profit. In addition, as visible by the success of multiple users on multiple social networking sites, there is the opportunity for multiple players in this industry. When it comes to social networking, EduXperience will be a niche player. Further, Educate Inc. and Kaplan compete on a level two scale. Both companies currently have limited offerings and are geared solely towards public and private schools and their students. Sylvan Learning Center, a division of Educate Inc., has been successfully experimenting with online Education, using tutors in online classrooms, but only focusing on Reading and Math. Along the same lines, Kaplan has expanded into the online realm; however, online courses are self-directed. Kaplan has also launched Kaplan University, an online University with a variety of disciplines to study (Kaplan). Despite both companies opening up to the online world, they both continue to only focus attention on purely the academic side of Education and fail to capitalize off of individual knowledge and networking. The focus of school-age students in terms of Reading and Math assistance is currently small as Kaplan has a large focus on test preparation at a high school level as well as at an expanding post-secondary level. The large size of the company, with a main audience of a different market, makes it difficult for these players to adapt into the same market as EduXperience, until the profitability margin grows large enough to attract attention. At the 15-20 percent growth rate, this market will draw more substantial attention from the big players in several years. Level three competition includes smaller supplemental education companies such as Huntington Learning Center and Kumon Reading and Math Centers. These centers provide extra assistance in particular areas of study for school-age children, but do not target homeschool students. Although these centers have been in existence for over 25 years and both have a solid reputation across the United States, the centers do not currently provide online services, lessening the threat of competition for EduXperience. 17 | P a g e Quia.com is a newer website geared toward teachers and schools promoting the ability to track students' progress, evaluate skills and foster learning. Offering games, activities, and assessment tools that teachers easily create themselves, Quia is a leader among foreign language teachers and others wanting to integrate the internet into learning. Quia is not a major competitor for EduXperience, as it does not promote its services to homeschool students or parents; however, it has built an extensive website and program to run a successful supplemental online education system. Until the market for online homeschool education becomes larger, Quia will not be in a position to be drawn to a new market. Many homeschool students are involved with community service and local activities; therefore, our final level three competition is local and regional clubs and organizations. Parents know socialization is necessary for homeschooled students as they are typically not exposed to social environments as often as children attending public and private schools. A segment such as this is not a large threat to the overall EduXperience Company as they do not threaten our whole idea of homeschool education and cannot viably compete in our industry. Level I Competition Brief Explanation Local and Regional Conferences A familiar way to gain ideas, trade material, network and attend speaker sessions Rainbow Resource Center A family-based online store of learning tools for homes and schools. The site offers products for all ages and subjects at a slightly lower cost than the retail price. Small to Medium-sized Homeschool Websites Websites including Homeschool.com and Time4Learning.com which provide a variety of forums, articles, ideas and online magazines Level II Competition Educate, Inc Brief Explanation Provides both in-center and online academic tutoring and test preparation for students by certified teachers in the supplemental education industry. While the physical Centers focus on test preparation, study skills and academic tutoring, the online tutoring experience currently only offers Reading and Math assistance. The annual revenue for Educate, Inc. is $330 million. This includes its subsidiary companies such as Sylvan Learning Center. Why EduXperience? Conferences in this market do not make a large enough margin to survive as a sole revenue driver. EduXperience accents conferences with a variety of support services, allowing it to viably compete in this market. EduXperience offers parents the opportunity to trade, sell and buy new/used materials online. Through this process, the parents see a profit as does EduXperience. Further, on the website, many learning tools are available for immediate download, reducing wait time extensively. Many websites are too small to gain a widespread reputation, and with so many small players, it is difficult for customers to determine which resources to utilize reliably. Many websites are not all-inclusive meaning homeschool parents pull from several sources; however, EduXperience brings all resources to one general location, minimizing time and effort for all. Why EduXperience? EduXperience focuses on the needs of Homeschool Education, not generic topics. We goes beyond just focusing on subjects such as Reading and Math. In this new wave of online education, Foreign Language courses are offered by certified teachers and native speakers, and homeschoolers themselves are often the best teachers, and the best assets. 18 | P a g e Facebook / MySpace Kaplan Level III Competition Huntington Learning Center Kumon Math and Reading Center Local and Regional Clubs Quia.com Online Social Networking website Kaplan has a current annual revenue of $2 billion and focuses on test preparation for a variety of disciplines and students of all ages. They offer incenter tutoring, classroom courses, self-directed online programs as well as software packages available for purchase. Further, they have offices throughout the country in which they offer in-center assistance. While they are expanding into the online educational world as well as higher education, Kaplan also has a focus on kids and schools. This market is small compared to the rest of their focuses, as they currently offer afterschool learning programs in 80 centers across the US and have partnered with schools to provide services. Brief Explanation Provides in-center academic tutoring and test preparation for students by certified teachers. The Centers are located across the US and have not expanded into the online realm. The largest Math and Reading supplemental education program in the world. With over 2000 centers in the US, students are tutored on-site, based on the Kumon Methodology. According to the Business and Company Resource Center, Kumon's annual revenue is $593 million. Clubs include Cub Scouts, Girl Scouts, YMCA and other popular groups One of the world's most popular educational technology websites in which educators can buy an account and set it up to correlate their own online activities with what they are teaching in the classroom and allow students access to games, practice activities, tests and more. Offering a safe and secure online environment, homeschooled students can network with each other while parents have the opportunity to do the same. EduXperience users also have the opportunity to utilize the variety of other products which accent this low-margin offering. EduXperience serves the homeschool markets, meeting the needs of homeschool families, while also expanding into school districts and Statelevel Education departments. Offering an expansive selection of tutoring courses, online classroom experiences and premade lesson plans for purchase, EduXperience is one step ahead. Kaplan is also too large to move quickly in dealing with this niche market. Why EduXperience? Taking supplemental education beyond the norm, EduXperience allows parents to decide on specific courses, lessons and themes fit to their child's needs. While Math and Reading are important to the educational world, many homeschool parents want to take their students beyond the classroom in these and other subjects. With experiential education, EduXperience brings real-life professionals into online classrooms and allows students to learn and interact with authors, engineers, government officials and more. EduXperience allows homeschooled students the same opportunities as public and private school students in terms of school clubs and organizations. A variety of student and parentrun clubs will be available for members to join, giving students a chance to be more involved with his/her peers while building leadership experience and social networking. Membership to EduXperience is free, allowing families the opportunity to decide if the experience fits their needs. A component of the website, educational games, are great motivators for students and a wide variety are provided to keep kids entertained and on their toes. The games are free, allowing all users to have full access. 19 | P a g e Substitutes Homeschool parents have already decided they do not want to use these systems; therefore putting them in the market for our products and services. Public Schools Private Schools Charter Schools F. Estimated Market Share and Sales Figures Through our portal, we believe we will be able to capture a significant part of the Social networking component for homeschooled students and parents and believe we can become a dominant player within two years as a forum for individuals to buy, sell, and trade information. Most of our initial income will be from advertising. Our number of user projections for first five years of operations: Year 2009 2010 2011 2012 2013 Social Networks 5000 45000 300000 750000 1500000 Peer to peer sales 500 3000 17500 35000 50000 Online Classes 0 500 2800 5400 12000 Experiential trips 0 100 250 250 250 Homeschool applications 100 750 4000 7600 9120 Translated in dollar terms, and using a multiple to represent unlisted revenue drivers, the projections will be: Year 2009 2010 2011 2012 2013 Social Networks $1,875.00 $16,875.00 $112,500.00 $281,250.00 $562,500.00 Peer to peer sales $11,250.00 $67,500.00 $393,750.00 $787,500.00 $1,125,000.00 Online Classes $0.00 $200,000.00 $1,120,000.00 $2,160,000.00 $4,800,000.00 Experiential trips $0.00 $50,000.00 $125,000.00 $125,000.00 $125,000.00 Homeschool applications $10,000.00 $75,000.00 $400,000.00 $760,000.00 $912,000.00 multiple 1.1 1.2 1.3 1.5 1.5 The growth rate for networking will reflect the growth pattern of social networking websites, such as Facebook and MyYearbook; however, it will be scaled down substantially. In social networking as a whole, we will gather only a small fraction of the market. Our peer-to-peer sales will gather a commanding market lead, as it works with the current players, offering an easier method to do what they are already doing. The online classes will be negligible to the online class market, but should gain market share compared to homeschooling focused online classes that don't have the infrastructure or variety to support the needs of the buyers. The experiential trips will capture less than 1 percent of similar programs, but will 20 | P a g e redefine the expectations of customers, as it is a highly differentiated product. Most of these products are niche players that do not compete directly with the major players in the industries. Since the market is really an emerging market, EduXperience will gather both new market share from market growth and market share by pulling together smaller players and eating into some of the larger players that are not focusing on the homeschool market itself. Most larger players are not paying attention to the homeschool market enough to put a focus on this niche growth market. As current trends show, the 22-24 year old age group spends a large amount of money online, with the 1821 year old age group spending less and 13-16 year olds spending significantly less. From this, we can predict the trend to continue in an upward pattern of approximately 33% growth (ipdnet). As current, young internet users become older, their spending habits and online purchases will continue to increase. When these users are in their mid 30's to 40's, their expected online expenditures will be significantly higher, creating an even larger online market for e-commerce. With this mind, the amount of money spent on our services is expected to rise over the upcoming years as spending trends are expected to steadily increase. Total Revenue over all offered product lines are expected to be: 2009 2010 2011 2012 2013 Low $20,350 $393,000 $2,237,300 $4,936,500 $9,029,400 Expected $25,437.5 $491,250 $2,796,625 $6,170,625 $11,286,750 High $30,525 $589,500 $3,355,950 $7,404,750 $13,544,100 Annual growth after five years is expected to be approximately 20 percent per year, approximately equal to the increase in size of the market, which is expected to expand at approximately the same rate. The rate is expected to increase drastically once EduXperience is able to break into the Indian and Chinese markets, but this will be recalculated and re-evaluated at time of potential expansion. These estimates are based on the margins for each sub-market. Profit for targeted ads is $.25 to $.50 per click. A conservative estimate would be for each user to click between zero and two advertisements per year, based on the prices paid and usage statistics for Paranoid Production Designs Inc. Peer-to-peer sales are based on an average of $100 spent per customer on online classroom materials. This is based on an average online cost of lesson plans being $5 per lesson from websites such as teacherspayteachers.com. Online classes profit is based on a charge $15 per hour, and a variable cost of $10 per hour, which is the going rate for licensed teachers teaching through classes at companies such as Sylvan Learning Centers, and a profit of $500 per individual who goes on an experiential trip, after variable costs. 21 | P a g e G. Ongoing Market Evaluation The market will require extensive research into the needs of the homeschooling families. We will continue to attend conferences and monitor the activities of the competition. While there are few sources of good information for homeschooling, as the market continues to grow, the US Department of Education will provide more information about the growing market. The advantage EduXperience has is that we are the forum for discussion and networking, giving us the in-depth knowledge of the market. This allows us to base