Investment in Ecommerce Store
Investment Criteria for Website selling Electronic Goods Online:
The business will require investment for Website Domain Purchase and other activities relating to Website Development. This includes SEOs, Keywords, Website Designing and constant update of price as soon as the price fluctuates in the market. This will require an investment of almost $50,000 (According to GoDaddy.com). For back office management, the office will be required. The company will have around 20-25 employees. An area of 1000 sq feet will be enough to house this number of employees. This will require a yearly expense of around $5000. Similarly, computers and office equipment will cost around $20,000. All of this means that the setup of this company will require around $50,000 in startup capital including any legal fee and stamp fee. It is recommended that the company is setup as a private limited company due to fewer requirements than if the company is formed as a public limited company.
The break-even for the company is assumed to be achieved in one year. Considering 10% growths and around 12% margin given to retailers on electronic products.
Management Team:
The management team will consist of MBAs having at least five years experience in the retail industry. They will be required to have working knowledge how online retailing and e-commerce works. For day-to-day operations experienced managerial level personnel will be hired to look after business processes such as Sales and Order Delivery. People providing day-to-day operation assistance to the company will report to a team of MBAs. This team will be responsible for planning operations, and trying to implement new and better systems. They will also responsible for marketing and growth of the company.
Company Structure:
The company will be structured into departments. There will be a separate department for IT, Sales, Order Dispatch, Customer Service, Marketing and Accounts. Each department will have a manager and four people working under him. Since, this is an online company there will not be a need of large number of workers. Planning and running of the department will be decentralized with each department making its own decisions but also trying to synchronize with what other departments are doing. Each department head will attend a weekly meeting with the board, and they will discuss plans and make sure they fit into the scope of the company’s future plans. (Daft, 1995)
Market Opportunity:
Large numbers of people are using the internet these days to make their day-to-day purchases. Advancement in ecommerce has also made it possible to sell to a large number of people without being confined to a fixed sales outlet. Similarly, ecommerce allows companies to cut down on the number of workers they are employing and also to cut down the stock. Stock can be procured as a new order comes and can be delivered to the customer. This saves holding cost and warehousing cost that can increase the size of the profit of a retail business.
Technology:
Since this company will be a technologically oriented company, any advancement in the technology is going to make the management of the business easier and hence this can be taken as an opportunity for further reduction of business expenses in the future and hence increasing the size of the profits of the business further.
Return on Investment:
Investors look for the return on investment that they can earn on their investment elsewhere. Investing in the company will give them 12% returns that is far greater than the investment in saturating industries and what they can earn if they choose to invest their money in T-Bills. Hence this will be an attractive investment for aggressive investors, and they can earn a good return on their money by investing in this company. (Ecornerstoreplus, 2013)
Exit Strategy:
It is recommended that investors leave the company as soon as it enters saturation stage or after there is no growth in the company. However, if the company is not profitable then the management should create an environment where it is easier for investors to leave the company with minimal damage to their investment. Investors will be informed about the company progress every three months with an option to sell their shares to the management if they think that their investment is not safe in the company. The management will use surplus funds of the company to buy back the investor shares if they are not happy with the company’s progress. (Kaplan, 2011)
References:
Ecorner store plus. (2013, 03 18). Retrieved from http://www.ecornerstoresplus.com.au/FAQs-
Questions-Ideas-Centre/Costs-Issues-Starting-An-eCommerce-Online-Business
Daft , R. (1995). Management. (5th ed., Vol. 3, p. 343). New York: The Dryden Publication.
Kaplan, M. (2011, 10 10). Practical ecommerce. Retrieved from
http://www.practicalecommerce.com/articles/3161-Venture-Capital-Firms-Bullish-on-Ecommerce
