Faisal Rehman

Game Loot Network Business Plan 3/8/2015 Game Loot Lance Baker Table of Contents Table of Contents 1.0 Executive Summary ..................................................................................................... 1 1.1 Objectives ......................................................................................................................................... 1 1.2 Mission.............................................................................................................................................. 2 2.0 Company Summary ..................................................................................................... 2 2.1 Start-up Summary ............................................................................................................................. 2 3.0 Services .......................................................................................................................... 3 4.0 Market Analysis Summary ......................................................................................... 3 4.1 Facts & Figure about Mobile Game Industry ................................................................................... 4 4.2 Statistics on Mobile Gaming............................................................................................................. 4 4.2.1 Global Industry Overview [3] .................................................................................................... 4 4.3 Market Segmentation ........................................................................................................................ 5 4.3.1 Demographic Data of Mobile Game [4] .................................................................................... 5 4.4 Sizing up the market ......................................................................................................................... 7 4.5 Top 25 Companies by Game Revenues: ........................................................................................... 9 4.6 Target Market Segment Strategy .................................................................................................... 10 4.7 Market Definition and Segmentation .......................................................................................... 10 4.7.1 Mobile Game Users ................................................................................................................. 10 4.8 Target Market: Mobile Game Users ............................................................................................... 11 4.8.1 Needs and Requirements.......................................................................................................... 11 4.8.2 Distribution Channels .............................................................................................................. 11 4.8.3 Communications ...................................................................................................................... 11 4.9 Service Business Analysis .............................................................................................................. 12 4.9.1 Competition and Buying Patterns ............................................................................................ 12 5.0 Web Plan Summary ................................................................................................... 13 5.1 Website Marketing Strategy ........................................................................................................... 13 5.1.1 Social Media Marketing:.......................................................................................................... 13 5.1.2 Social Media Measurements: ................................................................................................... 14 5.1.3 Social Media Metrics: .............................................................................................................. 14 5.1.4 Social Media marketing websites: ........................................................................................... 14 5.2 Video Marketing: ............................................................................................................................ 16 5.3 Website Design: .............................................................................................................................. 16 6.0 Strategy and Implementation Summary ................................................................. 16 Page 1 Table of Contents 6.1 SWOT Analysis .............................................................................................................................. 16 6.1.1 Strengths .................................................................................................................................. 16 6.1.2 Weaknesses .............................................................................................................................. 17 6.1.3 Opportunities............................................................................................................................ 17 6.1.4 Threats...................................................................................................................................... 17 6.2 Competitive Edge............................................................................................................................ 17 6.3 Marketing Strategy.......................................................................................................................... 17 6.3.1 Mass marketing ........................................................................................................................ 18 6.3.2 Website Marketing: .................................................................................................................. 19 6.3.3 Price setting:............................................................................................................................. 19 6.3.3.1 Most popular Apple App Store categories in January 2015 ............................................. 20 6.4 Sales Strategy .................................................................................................................................. 22 6.5 Sales Forecast.............................................................................................................................. 22 6.5 Milestones ....................................................................................................................................... 24 7.0 Management Summary ............................................................................................. 24 7.1 Personnel Plan................................................................................................................................. 24 8.0 Financial Plan ............................................................................................................. 25 8.1 Start-up Funding ............................................................................................................................. 25 8.2 Important Assumptions ................................................................................................................... 26 8.3 Break-even Analysis ....................................................................................................................... 26 8.4 Projected Profit and Loss ................................................................................................................ 27 8.5 Projected Cash Flow ....................................................................................................................... 30 8.6 Projected Balance Sheet .................................................................................................................. 32 8.7 Business Ratios ............................................................................................................................... 33 Table: Sales Forecast ......................................................................................................... 1 Table: Personnel................................................................................................................. 2 Table: Personnel................................................................................................................. 2 Table: Profit and Loss ....................................................................................................... 3 Table: Profit and Loss ....................................................................................................... 3 Table: Cash Flow ............................................................................................................... 4 Table: Cash Flow ............................................................................................................... 4 Table: Balance Sheet.......................................................................................................... 5 Page 2 List of Figure List of Figures Figure 1: Chart- Highlights ......................................................................................................................... 1 Figure 2: Chart-Start-UP ............................................................................................................................. 3 Figure 3- Demographic Data ...................................................................................................................... 5 Figure 4: Most popular Apple App Store categories in January 2015, by share of available apps [7] ... 21 Figure 5: Chart: Break-even Analysis....................................................................................................... 26 Figure 6: Chart- Profit Monthly ................................................................................................................ 28 Figure 7: Profit Yearly .............................................................................................................................. 28 Figure 8: Chart- Gross Margin Monthly ................................................................................................... 29 Figure 9: Chart- Gross Margin Yearly ...................................................................................................... 29 Figure 10: Chart- Cash .............................................................................................................................. 31 Page 1 List of Table List of Table Table 1: Start-up ......................................................................................................................................... 2 Table 2: Global Industry Overview ........................................................................................................... 4 Table 3- Market Analysis............................................................................................................................ 6 Table 4: Chart: Market Analysis (Pie) ........................................................................................................ 7 Table 5: Responses of people in each device category [5] ......................................................................... 8 Table 6: Sales Forecast ............................................................................................................................. 23 Table 7: Chart- Sales Monthly .................................................................................................................. 23 Table 8: Sales by Year .............................................................................................................................. 24 Table 9- Milestones................................................................................................................................... 24 Table 10: Personnel................................................................................................................................... 25 Table 11: Start-up Funding ....................................................................................................................... 25 Table 12: Break-even Analysis ................................................................................................................. 26 Table 13: Profit and Loss .......................................................................................................................... 27 Table 14: Table- Cash Flow...................................................................................................................... 30 Table 15: Table- Balance Sheet ................................................................................................................ 32 Table 16: Table- Ratios............................................................................................................................. 33 Page 1 Game Loot Network 1.0 Executive Summary Worldwide, smart phones are becoming the most widely available communication platforms. People are easily bored and need to be constantly entertained. We wanted to create fun loving Mobile games to provide an easy entertainment Game Loot Network provides Mobile Game Application. Game Loot Network talented core team members have produced quality Games, and have individual experience with dozens more. Game Loot Network is committed to creating high-quality, innovative, successful Mobile games Game Loot Network, believes the company is well positioned to be a valuable resource to gaming companies that are seeking cost-effective ways to implement a gaming design mission that will meet projected completion dates. One of the greatest obstacles is the ability of the production team to perform without wasted effort and resources. Game Loot Network has a documented history of completing its projects under budget and on time. This Business plan represents our market segments, market analysis, Sales strategies & financial plan. We are employing to get customers and create a solid revenue stream. Our unique focus of creating games over our competitors by giving customers a new outlet to enjoy mobile games. In the first 3 years of the business, we expect consulting to constitute a large portion of our revenue stream. Figure 1: Chart- Highlights Highlights $1,200,000 $1,000,000 Sales $800,000 Gross Margin $600,000 Net Profit $400,000 $200,000 $0 Year 1 Year 2 Year 3 1.1 Objectives Game Loot Network' objectives are as follows: • Achieve sales goal of $200,000 during first year of operation. • Achieve a customer base of 40 companies. • Increase sales by 60% during the second year of operation. Page 1 Game Loot Network 1.2 Mission The mission of Game Loot Network is to provide the highest quality service through the development of innovative, exciting products to the interactive entertainment industry. 2.0 Company Summary Game Loot Network, is a Mobile game development studio providing Mobile Games application. The company is launching its first flagship game, Game Start, which uniquely combines a popular social media game with (section removed for company privacy) gaming elements. It is launching Game Start on Face book in June 2015, and is implementing a rigorous marketing plan to penetrate the market and gain viral success in this high growth market. 2.1 Start-up Summary The start-up expense for the Game Loot Network is focused primarily on equipment and office space. Between years 2-4 management projects to gain 25,000, 100,000 and 500,000 users respectively, which translates into $2 million revenue by 2016. The Market of Game Industry is a rapidly growing market. Table 1: Start-up Start-up Requirements Start-up Expenses Legal Research Advertising and promotion Equipment and supplies Technological expenses Employee expenses Social Media Marketing Insurance Rent Other Expenses Total Start-up Expenses Start-up Assets Cash Required Other Current Assets Long-term Assets Total Assets Total Requirements $1,000 $10,000 $20,000 $80,000 $10,000 $20,000 $10,000 $2,000 $2,000 $5,000 $160,000 $290,000 $10,000 $40,000 $340,000 $500,000 Page 2 Game Loot Network Figure 2: Chart-Start-UP Start-up $500,000 $450,000 $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $0 Expenses Assets Investment Loans 3.0 Services Game Loot Network' cohesive, talented development team offers their clients: • Game concepts and development for Mobile Games Application • 2D and 3D art, programming, libraries to spec. • Interface design and software enhancement. • On time and on budget shipping. 4.0 Market Analysis Summary The Market the Game Industry is a rapidly growing market. The global mobile games market is expected to grow 27.3% annually, reaching $23.9 billion US by 2016, according to a new report from mobile game marketers, AppLift, and the market research firm, New zoo. Mobile games are the fastestgrowing segment of the market, with revenue set to nearly double between 2013 and 2015 from $13.2 billion to $22 billion. The Year 2013 is an important year for the game industry as Sony, Microsoft and recently Nintendo are releasing their next-generation video game consoles to a market that may be moving in another direction due to the popularity of mobile devices. Facebook dominates as the primary social media platform for social network games as 290 million people play games monthly and 20% of these users pay cash for in- game benefits. The major market participants in this area are Gung Ho, Super cell, King, GREE, Dena, Kabam , Game loft , Storm8 ,Zynga Inc., Sega . These leaders hold large assets of active monthly players worldwide, possess majority market share and are seeing rapid revenue growth in this industry. With its unique product which synthesis of highly popular gambling/gaming elements in the market, together with a strong marking implementation plan. [1] Page 3 Game Loot Network 4.1 Facts & Figure about Mobile Game Industry • • • • • • • Game revenues will grow at a compound annual growth rate (CAGR) of 6.7% to $86.1 billion by 2016 The number of gamers worldwide will rise from 1.21 billion this year to 1.55 billion Mobile gaming will grow at an average annual rate of 19% for smart phones and 48% for tablets, grossing $13.9bn and $10.0bn in 2016 respectively Combined, they will take a 27.8% share of the global market, up almost ten percent points compared to this year Primarily fuelled by a global CAGR of 10.4% for MMO games on PC, the computer screen will continue to lead other screens with a market share of 35.8% totaling $30.9bn in 2016 Nextgen consoles, free-to-play triple A titles and alternative distribution of games to TV will help to consolidate revenues through the TV screen at a global growth rate of 3.5% The Asia-Pacific region will strengthen its leading position with a 37.9% market share by 2016 as emerging markets drive global growth [2] 4.2 Statistics on Mobile Gaming Mobile games contribute greatly to the high growth rate of mobile media use. On the global level, the industry generated 7.8 billion U.S. dollars revenue in 2012 and the figure is expected to grow to more than 12.6 billion by 2016. The share of mobile games in video gaming revenue is expected to grow from 14 to 17 percent in the same period. In 2013, there were 909 million mobile gamers worldwide, nearly half of which resided in the Asia Pacific region. North America came second, with 146 million mobile gaming enthusiasts. Among the North American enthusiasts, 52 percent are men and 48 percent are women. The largest share of mobile gamers belongs to adult Millennial, comprising 38 percent of the total, with Generation X and teenagers ranking second and third among gamers, respectively. Smartphone games are still more popular than tablet games—among mobile gamers, 71 percent play Smartphone games and 38 percent play tablet games. A majority of mobile gamers invest more than half an hour daily into the activity, and 21 percent play for more than hour each day. Smartphone and tablet games are most often played at home, somewhat contrary to the portable character of the devices. More than fifth of the players play games on portable devices during their commute and at the office. The most beloved genres are brain and puzzle games as well as cards and casino games. [3] 4.2.1 Global Industry Overview [3] Table 2: Global Industry Overview Sr. No 1 2 3 4 5 6 7 8 9 Description Value Mobile Contents Market Value Worldwide Global Mobile Gaming revenue Mobile Gaming Share of total gaming revenue worldwide Mobile Contents market Value in North America Mobile Gaming Revenue in US Number of Mobile phone Gamers in the US Mobile Phone Gamers penetration in the US Weekly time children spent playing Mobile Games Average Annual Consumer spending Mobile Games $20bn $10.58bn 16% $4.7bn $2.61bn 144.1m 45.2% 7h $26.1 Page 4 Game Loot Network 4.3 Market Segmentation We want to determine which types of customers would be interested in our product so we can target them directly through our marketing channels. The four basic market segmentation strategies are based on: • Behavior (rate of usage, loyalty status, readiness to purchase etc.) • Demographics (age, gender, occupation, socio-economic group etc.) • Psychographics (personality, lifestyles etc.) • Geography (customer location, region etc.) The one we are using is Demographics. Our segmentation is as follows: Figure 3- Demographic Data 4.3.1 Demographic Data of Mobile Game [4] Gaming industry statistics for 2014 give us some interesting insights to gamer habits and demographics around the globe. The average age of a gamer / game buyer falls in the 30-35 age range within the U.S. and over three-fourths of all gamers play for more than one hour each week. Examining the stats of today against the State of Gaming of the not-so-distant past, it’s easy to see how the generation of gamers that cut their teeth on Mega Man 2 has graduated to making games a part of their daily lives. These facts truly speak to the passion gamers have had ever since gaming burst onto the scene just a few decades ago. Facts & Figure about US Mobile Gamer Data: • • • • • • 58% of Americans play video games Average age of players: 30 62% of all gamers are adults 68% are above 18 and older 45% are female (up from 42% in 2012) and are usually over 18 Average of 2 gamers per household Page 5 Game Loot Network • • • • • • 51% of households own at least one console Average age of purchaser: 35 77% of gamers play at least one hour a week 36% play games on their smart phone Parents are involved in their kids’ game purchases 89% of the time 79 percent of parents place time limits on video game playing, compared with 78 percent who limit Internet usage and 72 percent who limit TV viewing Facts & Figure about UK Mobile Gamer Data: • The average UK gamer is 35 • Most are male • Plays for almost 3 hours a day • The average gamer fights with their partner over their gaming hobby twice a week, with some 15% of people saying they’ve broken up over the amount of time spent gaming. • The UK is just behind the U.S. in terms of iPad game purchases. Facts & Figure about Other Countries Mobile Gamer Data: • The world-wide video game industry grew 9% in 2013 and now exceeds $76 billion with projections it will reach over $86 billion by 2016. • The European market for games is almost $20 billion. • Japan and China lead the pack when it comes to iPhone/iPad games. Russia is also a major user, ranking #6 in the world. • The games industry in India grew 16% in 2012, to $227 million. • 91% of all people on earth have a mobile phone • 56% of people own a smart phone • 50% of mobile phone users use mobile as their primary Internet source • 80% of time on mobile is spent inside apps or games Table 3- Market Analysis Market Analysis Potential Customers Male Female Teens Total Growth 25% 18% 30% 82.24% Year 1 Year 2 Year 3 Year 4 Year 5 CAGR 10,000 9,000 15,000 34,000 25,000 16,000 30,000 71,000 50,000 35,000 60,000 145,000 100,000 75,000 120,000 295,000 125,000 100,000 150,000 375,000 88.03% 82.57% 77.83% 82.24% Page 6 Game Loot Network Table 4: Chart: Market Analysis (Pie) Market Analysis (Pie) Male Female Teens 4.4 Sizing up the market Perhaps the most important question for anyone trying to market a new product or service is determining the size of the potential market. The estimation of market size gives a business plan its sense of scale. We want to know how big the opportunity is currently and how big it may become in the future. Sizing up the market is probably the most challenging aspect as it is not an exact science. Market size is relative, markets change quickly, so market numbers are educated guesses at best. There are many techniques which can help us estimate the size. The one we shall use is the chain-ratio method. It consists of multiplying a larger market size, which is well known, by a chain of related-percentages. According to the 2012 RJI Mobile Media News Consumption Survey, researchers have determined that two-thirds of U.S. adults used at least one mobile media device in their daily lives during the first quarter of 2012. Smartphone and large media tablets are now the preferred mobile media devices. In the two years since Apple defined the large media tablet market with its iPad, nearly a third of all adult mobile device owners in the U.S. said they are using one. For news organizations and advertisers, users of these devices, especially those who own large media tablets, have appealing demographic profiles. They tend to be relatively affluent, well-educated and avid news consumers. [5] DEVICE CATEGORIES: Nearly 70 percent of mobile media device owners routinely used two or more mobile media devices. Sixty percent of all Smartphone owners used at least one other mobile media device. More than half (51%) of all large media tablet owners also used an Apple iPhone. Among Smartphone owners who used one or more additional mobile media devices, 44% owned an Apple iPhone, 37% owned a variety of Android-powered Smartphone brands, 14% owned a Blackberry, and about 5% owned some other brand. The following table summarizes responses in each device category. Page 7 Game Loot Network Table 5: Responses of people in each device category [5] Device Category Percent of All Respondents Smart Phones Large Media Tablets Small Media Tablets E-Readers Other Mobile Devices 57% 21% Percent of All Mobile Device Owners 87% 32% 8% 12% 13% 21% 19% 31% Most Popular Brands in Each Device Category Apple iPhone Apple iPad Amazon Kindle Fire Amazon Kindle Apple* Percent of Brand Within Device Category 39% 88% 68% 73% 43% GENDER: Men are still somewhat more likely than women to use mobile media devices, but the gap appears to be closing. In this survey, men accounted for just over half of all device users. However, gender ratios varied significantly within device categories. Women accounted for more than half of the small media tablet and e-reader users. Device Category Men Women Smartphone 60.3% 39.7% Large Media Tablet Small Media Tablet 63.6% 36.4% E-Reader 48.8% 51.3% 45.4% 54.6% Other Mobile Device 54.3% 45.7% AGE GROUPS: Individuals between the ages of 18 and 34 represented the largest percentage of mobile media device users (45%). More than half (51%) of the non-mobile device users were ages 55 or older. Age Group Age 18-34 Age 35-54 Age 55 or Older Percent Mobile Device Users 44.9% 32.4% 22.7% Percent Non-Mobile Device Users 18.7% 30.2% 51.1% Percent All Respondents 36.3% 31.7% 32.1% INCOME GROUPS: Mobile media device users tended to have higher incomes than non-users of mobile media devices. Among all respondents who indicated that they had an annual household income of $75,000 or more, 81% were mobile device users. Income Group Less Than $75,000/Year More Than $75,000/Year Percent Mobile Device Users 59.4% 81.3% Percent Non-Mobile Device Users 40.6% 18.7% Percent All Respondents 100% 100% Income differences were significantly more pronounced for different brands within each device category. For example, 50.8% of Smartphone users with an annual household income of $75,000 or more owned an Apple iPhone. Conversely, 50.4% of Smartphone users with an annual household Page 8 Game Loot Network income of less than $75,000 owned an Android-powered Smartphone. The following table compares income ranges between Smartphone brands and large media tablet brands. Income Group Android Smartphone Less Than $75,000/Year More Than $75,000/Year Apple iPhone Blackberry Smartphone 63.9% 38.5% Android Apple iPad Large Media Tablet 41.3% 61.5% 39.1% 36.1% 61.5% 58.7% 38.5% 60.9% 4.5 Top 25 Companies by Game Revenues: The data is based on analysis of annual and quarterly financial reports of a number of relevant publicly listed companies and includes various estimates and assumptions, which may or may not be indicated explicitly. Revenues (GAAP) are restated to reflect Calendar Years, therefore do not necessarily match reported Fiscal Year results of individual companies. Revenues exclude hardware sales and other nongame sales to the extent publicly available. Microsoft and Sony estimates represent all Xbox and Play station non-hardware platform revenues.[6] Sr Company Q1 Q2 H1 H1 H1 No. 14 ($M) 14 ($M) 14 ($M) 13 ($M) Growth 1 Tencent 1.682 1.794 3.476 2.479 40% 2 EA 1.123 1.214 2.337 2.158 8% 3 Activision Blizzard 1.111 970 2.081 2.374 -12% 4 Sony 1.166 875 2.041 1.705 20% 5 Microsoft 1.147 843 1.990 2.000 -1% 6 Apple 920 960 1.880 1.147 64% 7 Google 694 724 1.418 673 111% 8 King.com 641 594 1.235 661 87% 9 GungHo Ent. 485 432 917 711 29% 10 Nexon 462 359 820 772 6% 11 Nintendo 419 387 806 825 -2% 12 Ubisoft 259 482 741 346 114% 13 NetEase 347 377 723 663 9% 14 DeNA 333 277 610 879 -31% 15 Square Enix 369 228 597 412 45% 16 GREE 302 258 560 692 -19% 17 Disney 268 266 534 377 42% 18 Konami 318 198 516 532 -3% 19 Facebook 237 234 471 427 10% 20 Bandai Namco 248 205 453 394 15% 21 NCSoft 173 207 380 358 6% 22 Sega 216 164 380 346 10% 23 Changyou 181 178 359 360 0% 24 Zynga 168 153 321 494 -35% TakeTwo -27% 25 195 125 321 442 Interactive Page 9 Game Loot Network 4.6 Target Market Segment Strategy Our ideal customer is between the ages of 13 and 45 who enjoys playing video games and has a mobile phone that allows applications to be downloaded, such as the I-Phone, Android Games Customers are typically male and female and own or have access to a Smartphone. They have a wide range of disposable income. Some are teenagers living at home; others are college students or those who have joined the workforce in the last 5 years. Our game design consulting customer is the VP of marketing or equivalent position of a medium to large organization who is looking for creative promotional methods for their products and services. Our strategy focuses on developing an initial set of libraries containing game attributes that can be combined to create new games. Upon launching the first set of games, we will stay in regular contact with our customers via numerous online methods, including social media and email marketing. After creating these libraries and games, we will be able to market fast-turnaround consulting services to organizations who would like their own promotional games. 4.7 Market Definition and Segmentation We target two segments: mobile game users and organizations that want to reach them. In both of these segments, customers are computer and mobile phone savvy and enjoy creative experiences. 4.7.1 Mobile Game Users There are two types of customers that define the demographic of mobile gamers: teens (including preteens) and young adults, which for the purposes of this marketing plan will include teenagers age 18 and above as they are considered young adults by the general population as well as by the law. The primary difference between the two demographic segments is who provides the money for game purchases. Free mobile games: • We offer trimmed back versions of our games for free so that users can get a taste of the full game without committing any money up front • Some features of free versions are disabled and advertising is displayed in some strategic locations within the game so that users are not bothered or distracted by the ads. For example, a soda company may pay for a sponsorship and we might embed their name as a clickable (tappable) billboard that appears as if it is part of the game itself. Paid mobile games: • Our paid mobile games contain a broader set of features. The price range is between $0.99 and $4.99 in order to create very low price resistance for customers. • Paid games are also monetized via clickable (tappable) ad sponsorships embedded within the games. Games are available via instant download on their appropriate mobile platform Google like Android Play Store and IOS App Store Page 10 Game Loot Network 4.8 Target Market: Mobile Game Users Our mobile games have a timely connection to current news events. The mobile game user market enjoys interacting with games that give them a sense of power and excitement, allowing them in some way to live vicariously through the game. 4.8.1 Needs and Requirements Mobile game users get tired of games quickly and are constantly looking for new games to play. With the plethora of news events always in circulation, we will target the news media so they discuss games related to the stories they are covering. The games we develop will target stories that are covered by the types of media outlets this demographic consume. The users in this segment also have limited financial capacity. Teens typically get their money to make game purchases from their parents, which can be in the form of gifts or allowances, or from low paying jobs. Older teens and young adults also have limited financial capacity yet choose to spend part of their disposable income on games as one of their sources of entertainment. Very frequently, these customers talk to each other about which games they enjoy, including strategies for playing and winning. They also participate in online forums and discussion groups to gather tips and other information to help them play or to find new challenges. Additionally, they enjoy being listed as the "high score" when there is a public setting available for players. We intend to offer this public setting by allowing the customer to upload their score to our web site for each game. The highest scores will be posted, giving the player worldwide "bragging rights". As a result, the word of mouth potential for timely games is explosive. 4.8.2 Distribution Channels I-Phone & Android games are distributed through the App store which is currently controlled by Apple and Google. One of the obstacles we have to overcome is the speed with which Apple approves applications for downloading, which will be important for us since our games have a time sensitive nature to them as they will be popular as long as a news story is in circulation. Google's Android offers an open source model so they will likely surpass the I-Phone in the number of applications available soon. This also eliminates the need for review and allows us to post new applications quickly. As more applications come out for this device, it will gain market share. We want to be positioned so that we provide excellent games for this community. Blackberry applications are controlled by Blackberry through Blackberry App World. Their users tend to be older and more focused on business uses for their mobile devices. Because of this, we will not focus our initial efforts on Blackberry. However, we do have the expertise to build Blackberry applications and will create custom games for this device for consulting clients who would like them. 4.8.3 Communications We will leverage social media and word of mouth for the vast majority of our marketing using platforms such as Twitter, Facebook, and MySpace. These platforms are widely used by the customers in our demographic market. We will make announcements via regular tweets and updates to our fan page on Facebook Page 11 Game Loot Network The newsworthy component of our mobile games also makes it enticing for traditional media to publicize a game that is related to a current news story. We will also use our email marketing list which is comprised of people who have expressed interest in knowing when we release new games. We have segmented our email list so that we can send appropriate emails to media and different ones to actual gamers, our customers. 4.9 Service Business Analysis Companies are combating development costs by outsourcing segments of the development project. Currently, it is estimated that 30% of project work is outsourced. There are a number of advantages to this strategy. By outsourcing, companies can take advantage of a tremendous gaming experience base without paying the personnel price tag to retain the talent on payroll. By negotiating a price for the outsourcing, companies can also cap development cost. More importantly, as few larger companies compete in the marketplace for dominance, a number of service firms will emerge to fill the demand for quality developers that are necessary for specific projects, much like the rest of software industry. It is estimated that product development in the software industry can save upwards to 30% of development costs by outsourcing key elements of the development process. 4.9.1 Competition and Buying Patterns There are many mobile game developers. However, few are actual companies. Most games are developed by one person who does not have the marketing savvy to integrate advertising sponsorships into their games as we have outlined in this marketing plan. Our unique twist on the types of games is also an advantage because we will not have to spend as much time and energy thinking of the game themes - the news of the day will provide that fodder so our efforts can be concentrated on developing that real-life story into a game. The interactive game industry is based on the hype that is created by core players. The ability to create product that satisfies the gaming demands of core players is a critical consideration when outsourcing opportunities emerge. This unique cultural aspect of the industry influences how companies outsource. Technological expertise is secondary to the ability to create a product that the target group will immediately be comfortable with. Companies are looking for production track records with products with similar play devices that were focused on similar target users. Typically, a selected group of firms are asked to submit proposals for the outsourcing assignment much like an ad campaign. The firm with the best ideas and the best talent to implement the idea gets the contract. Over 80% of the interactive game companies have outsourced segments of game development. This represents a client base of 400 companies. Currently there are 100+ firms that compete for outsourcing contracts in the interactive game industry. Because of the unique cultural aspect of the interactive gaming community, companies specialize in gaming devices or user groups in order to gain advantage in the proposal process. The team's track record is the most important pivotal issue when competing for outsourcing contracts. A firm that has an intact team that has achieved past project goals has an advantage in the bidding process. Production companies are looking for assurances that deadlines will be met and the quality will be there. The production of a game is on a tight schedule and any missed deadline will ripple effect over the entire project, and could result in missed revenues and increased expenses. Page 12 Game Loot Network 5.0 Web Plan Summary The website will be used as a way to disseminate information regarding the firm, show past examples of work. In today's day and age, a website is almost a given, a standard source of information regarding the company. 5.1 Website Marketing Strategy The marketing strategy for the website will be based on inclusion of the Internet address in all materials that Game Loot Network releases. These strategies include the use of search engine optimization and pay per click marketing. Marketing Strategy Our marketing strategy will focus on two segments. Those segments are described in the following subtopics. We will implement a strategy that treats customers as a community. This means our marketing resources will be centered on advertising both sales promotions (events) and personal sales (customer service, friendly atmosphere).Marketing promotions will be consistent with the Mission Statement and support the following objectives: 1. 100% customer satisfaction, measured through repeat customers, referrals and surveys. 2. To achieve a respectable profit margin within the first three-years. 3. To achieve a healthy net profit by year two. 4. Following is the important Marketing Strategies • Social media Marketing • Mobile Marketing & Design • Video Marketing • Website Design • Branding 5.1.1 Social Media Marketing: Social media is a vast and growing landscape that offers many unique marketing opportunities for businesses of all kinds. Making the most of this interactive environment requires an understanding of how different social media channels work and how your customers are using them to engage with companies whose products and services they enjoy The social media strategy ladder looks like this: • • • • • Step 1: Content Step 2: RSS (Real Simple Syndication) Step 3: Social Search Step 4: Social Bookmarking Step 5: Social Networks 1. Step 1- Content: There are some that will refer to content as blogging. Content is the foundation of social media marketing. Content will leave a longer lasting impression. Content will engage Page 13 Game Loot Network 2. 3. 4. 5. your target audience and drive profitable action to your business. Content also isn't just about your content, it's about reading content from others commenting on that content and sharing. Step 2 – RSS: I view RSS as easy way curate information that will give you ideas, help you think of new topics and also give you information to share with your networks. RSS stands for Real simple syndication. It's an easy way to aggregate and filter content around particular subjects that interests you and your target audience. RSS is easy to use and is delivered right to your desktop. My personal favorite RSS reader is Google Reader, it's one of my 7 time saving tools that I use. Step 3 - Social Search: That's right, social search has increased in importance over the last few years. Social search is the integration of personal social results and their social graph in public search listings. What you say and what others say about your business on social networks gets listed. You can use social search to not only stimulate conversation, but to also assist you in managing your reputation. Step 4 - Social Bookmarking: Social Bookmarking sites provide you with a way to find and bookmark and tag stuff all over the web. You can curate information that interests you and share it with your social bookmarking community. Tagging content to and participating in social bookmarking communities is a great way to open up more channels to your business and drive search traffic. Social bookmarking creates valuable links and search engine juice; these two things empower your content to rank higher in search engine results Step 5- Social Network :Social network like Face book, Twitter, LinkedIn and Google+ but unless you've implemented the previous steps climbed up the ladder, Social networks should work to grow your business, not just suck away your time. Social networks carry a lot of value to your business, but without content and engagement these networks will leave you empty handed. 5.1.2 Social Media Measurements: Social media measurement or ‘social media monitoring’ is an active monitoring of social media channels for information about a company or organization usually tracking of various social media content such as blogs, wikis, news sites, micro-blogs such as Twitter, social networking sites, video/photo sharing websites, forums, message boards, blogs and user-generated content in general as a way to determine the volume and sentiment of online conversation about a brand or topic. 5.1.3 Social Media Metrics: ROI (Return on Investment): ROI, or return on investment, is a measurement of efficiency. Social media ROI is defined as a measure of the efficiency of a social media marketing campaign. It is calculated using the following formula: The difficulty emerges however in attempting to determine the value of "SM return", as indeed it is for any intangible asset. 5.1.4 Social Media marketing websites: The major social media websites are as follows: Page 14 Game Loot Network Facebook: Facebook is rapidly becoming the hottest site in all of online land. Approximately more than 800 million individuals are using Face book. At the moment Face book is the second best rated web page. Face book customers can post notices, create categories, distribute material with thousands of buddies and upload video clips. Over one billion people like and comment an average of 3.2 billion times every day. When you have a strong presence on Face book, your business is part of these conversations and has access to the most powerful kind of word-of-mouth marketing recommendations between friends. Twitter: Every day, millions of people turn to twitter to connect to their interests, to share information, and find out what's happening in the world right now. Anyone can read, write and share messages .For businesses and brands, these conversations provide a rich canvas and a powerful context in which to connect your messages and your brand to what people are talking about right now. Businesses can also use Twitter to listen and gather market intelligence and insights. It is likely that people are already having conversations about your business, your competitors or your industry on Twitter. Blog Marketing: Blog marketing is any process that publicists or advertises a website, business, brand or service via the medium of blogs. This includes, but is not limited to marketing via ads placed on blogs, recommendations and reviews by the blogger, promotion via entries on third party blogs and cross-syndication of information across multiple blogs. You Tube Marketing: YouTube is the largest video sharing site to date, with the most traffic and the highest amount of users on it making YouTube the definitive place for getting your videos published and marketed. There are going to be a lot of tools YouTube has created for marketing your video • • • • • • • On videos there is a share option. You can share by email address or with friends you have attached to your account. Remember the more friends you have the more people you can send to. Bulletin Boards: By posting a message this video will be displayed to all of your friends on your profile. Invite to subscribe: This feature is available in your account once you request a friend invite. Make sure your video appeals to the community Sharing videos with email: We like to go viral with our marketing campaigns for videos. Send videos out to your friends and family with a link to the video and an encouragement to share it. Use StumbleUpon.com: Submit the video to video.stumbleupon.com and then import your email addresses and send to your friends on stumble upon. Social Media it: You can leverage dig and other social sites like face book and MySpace to drive traffic to videos. LinkedIn: You can target your ad by geography, job function, industry, company size, seniority, age and gender, as well as company name, LinkedIn group and job title. There is plenty of scope to define your audience. Your ad will display either along the top, bottom or right-hand side of a member’s home or profile page, and can contain both text and an image. Link your ad to your own website, your LinkedIn company page, your group or anywhere else you might want to send your visitor for further information. Or consider sending your visitor to your company Face book page where you can possibly convert her into a Like. In terms of cost, LinkedIn ads run very much the same as other text ad systems, Page 15 Game Loot Network on an auction or bid basis. You can pay either for CPC (cost per click) or CPM (cost per 1,000 impressions). 5.2 Video Marketing: Video Marketing creates targeted advertising visible to consumers when they are actively looking for your local business or services. Video marketing ranks better and faster than any other form of Internet Marketing. Let us create a short video introducing your business to potential customers. Video not only has the ability to inform and educate your customer about your services, it also has a very strong call-toaction! According to recent customer surveys, 92% of customers expect you to have an online presence even if you are a brick-and-mortar business. Now, a day’s very creative ads are being made, the ads which are very catchy and jingly. Such ads are made that one can’t resist watching them, even watching on Television is not enough, and one can see those ads on their websites or on YouTube any time. 5.3 Website Design: The local business, just wants to be found online, offer information and location details, and possibly sell their products online via an ecommerce storefront. There are very basic needs that need to be met for a majority of the local business aiming to build a website. Websites should be built with Content Management Systems that offer the client the ability to update their website with very minimal computer skills. For instance this website is run on the Word Press Content Management System, and if you are able to work in Microsoft Word typing a letter, you already have all the skills you need to update your website 6.0 Strategy and Implementation Summary Game Loot Network' developers, have extensive connections throughout the gaming industry. They will be responsible for marketing the company's services to potential customers. 6.1 SWOT Analysis A SWOT analysis is a method used to evaluate the Strengths, Weaknesses, Opportunities, and Threats of a business. The purpose is to align our strategies with the realities of our business environment in order to: • Maintain and build on our strengths • Take advantage of our opportunities • Fix or eliminate our weaknesses • Counter threats 6.1.1 Strengths • • • • Strong developer team: The developers of the mobile games app are key developers of the R&D department with very strong skills. First to market: we have and must always keep a step ahead. A first mover may not always be an advantage. Secondary or late movers to an industry or market, have the ability to study the first movers and their techniques and strategies. They can learn from their mistakes. The competition is also allowed to benefit and not incur the costs which the first mover has to sustain. First movers must deal with the entire risk associated with creating a new market, as well as the technological uncertainties which will follow (Shifts in technology or customer needs). Innovative approaches to technology specially on Game play Page 16 Game Loot Network • • Easily accessible to user through their smart phones First Fun Games Provider with prizes 6.1.2 Weaknesses • • • • Their software is dependent upon the platforms that are created by other companies, leading to limitations in design capabilities, graphics and game performance. Product Quality not Top- Notch Slow in response to customer enquires Long Subscription Progress 6.1.3 Opportunities • • • • • Mobile advertising. Mobile advertising markets are expected to grow in double digits over the next few years and Microsoft has a great opportunity to tap into these markets with its mobile OS. Mobile device industry. Smartphone’s and tablets markets will grow steadily over the next few years and Microsoft could exploit this opportunity by introducing more of its own tablets and a new company phone. Video Game Industry expecting significant growth for the Next Years Rise of Interest in video games from all demographics Growing Consumer base in emerging markets 6.1.4 Threats • • • Competitors emerging: as we are first to the market, we need to be sure to stay one step ahead of the competition. PC and mobile Segments Other Indirect competitors entering the field to complete directly 6.2 Competitive Edge The competitive advantage of Game Loot Network is always bringing in a project before the projected deadline. As noted in the Market Analysis Summary, one of the greatest challenges will be production costs. Nowhere is this more critical than with outsourced projects. If a company can produce by deadline, they will get more work. 6.3 Marketing Strategy The next question we have to ask ourselves is how we will reach our potential customers? How can we make them aware our app is available and convert them as our customers? This will be realized by our marketing strategy. There are three kind of marketing strategies: • • Direct sales: this is done when a customer base exists, where we can directly reach out to our customers usually by phone, by email or through direct personal contact Direct marketing: there is a straight communication to the customer (or potential customer; this can be used on contact information from a database) with advertising techniques such as SMS, email, interactive consumer websites, online display ads, fliers, catalogue distribution, promotional letters, and outdoor advertising. Page 17 Game Loot Network • Mass marketing: Is the technique of trying to spread a marketing message, to anyone and everyone who is willing to listen, through big audience media such as radio, television, internet, etc. For our Games, we are going to use two different marketing strategies: 6.3.1 Mass marketing We have seen that our potential customer base is between two and three million people, so we have quite a big audience. These people are not existing customers, we have no relationship with them nor do we possess their contact information. The strategy to adopt is a mass marketing strategy. We will try to reach to our niche through mass marketing channels, mainly the internet. There are many ways to proceed: • Getting our app into the iPhone app store & Android App Store. In later stages the app will be available on independent app stores such as GetJar, Handango, and Amazon etc. We choose for a slow distribution so we can manage feedback, fix bugs quickly and concentrate on updates before a rollout strategy. • Using social media. We will create some YouTube video’s where we will demonstrate our application. Besides YouTube, we will create Facebook and Twitter accounts and use LinkedIn as a communication channel. • Making an app-specific web site. We will also promote our app through our firm’s website. • Setting up search marketing campaigns through search providers such as Google, Yahoo and Bing. • Reaching out to bloggers such as TechCrunch, TheNextWeb, Mashable, VentureBeat, TUAW etc. • Participating in events: exhibitions, meet-ups, conferences etc.…in the electronics and automation world. • Placing an advertisement or an article in a specialized magazine. The marketing strategy can be divided in two parts: A pre-launch and post-launch strategy. The prelaunch strategy is used to create awareness and visibility. The goal is to try to acquire the interest and build the curiosity of as many users as possible. The post-launch strategy is used to maintain existing customers, to increase the conversion rate and to create user retention Pre-launch strategy: i. ii. iii. Landing page: create a landing page, typically a one page website that is an advertising tool for our app. Even though a lot of downloads will come directly from the app store, a huge amount of traffic is driven through the web. This is also a good way to build an email database as we will invite people to share their email addresses to stay updated when the app launches. These are the people that are more likely to be converted into customers. Blog: create a blog where we will write regularly about the issues that our product covers or might be a solution for. Social Media Profiles: create social media profiles so we can spread the word about our blog posts, our landing page and website, and also write about the category and related content of our app. It is also important to follow and connect with influential people of the niche market (bloggers, reviewers, writers etc.) Page 18 Game Loot Network iv. SEO: begin search engine optimization or SEO for our website. The idea of SEO is to generate as much traffic as possible on our website by finding the most relevant and popular keywords for the site and our app and using them in a way that generates and converts traffic. v. Tech Blogs: once the beta testing is finished and the app is ready for launch and bug-free, we want to prepare a press release of our product idea and start getting in touch with blogs such as Mashable, TechCrunch, TheNextWeb, FastCoDesign, Ars Technica, etc. A press release will contain a short description of the app and its key benefits, some screenshots, links to videos, links to user testimonials and reviews and a link to the website which includes our contact information. vi. Forums: we want to be as active as possible in gaming forums and try to integrate with our response a link back to our website. These links are crucial in the Search Engine Optimizing (SEO) of our website. The more back links we have from other blogs and forums back to our site, the higher up our site will appear in search engine results. We must keep participating in online forums to keep discussion about our product active and on-going. A great tool to use here is Google alerts. This way we can track keywords and news about our app. Post-launch strategy: i. ii. iii. App Store marketing: we will try to grab the attention of the online audience by having a catchy app icon. App stores require us to mention keywords that we feel our customers will use to search for our application so the selection has to be done wisely. Our Game description is also important, it is our selling pitch. It should be short, explain key benefits and highlight the cool features. Game App Review Websites: as a large audience reads online reviews before downloading Game, we need to prepare a press release and send it to app review sites. Ratings and Reviews: we will encourage our customers to review and rate our application. The more the ratings, the more chances of it being downloaded from the App Store. All feedback, positive and negative, must be quickly responded to. 6.3.2 Website Marketing: i. ii. iii. The website and launch page also has to be social media friendly. We have to incorporate links to our social media accounts: a Facebook Like button, a Tweet button etc We have to integrate badges. Badges are quickly recognized as download links to the app marketplace Create call-to-action buttons. The goal of these buttons is to get a visitor to our site to do something. In our case that something could be downloading our app, requesting information and signing up. Someone signing up for our email newsletter is someone we’re going to be able to reach easily and engage with. Newsletters are a powerful tool as they give us the possibility to: • Gauge the interest people have in our app (no sign ups? Maybe something is wrong) • Keep people informed about when our app is launching. • Ask people for feedback • Ask people to vote for our app for an award or a contest • Let people know about great news and milestones 6.3.3 Price setting: There are a number of factors that should help us determine what to charge for our Game app. The first step consists of pricing our app in relation to the existing competition. This assures fair pricing for our Page 19 Game Loot Network mobile app and gives our audience the impression that we are at par with the competition. Raising our price slightly above the competition will make customers think that ours is a better product. In our case we are first to the market with our product so there is no price setting by the market in our category. The most important key in Game app pricing is the user expectations. Users expect simple apps to be either free or $0.99. More complex utilities often sell for between $2.99 and $4.99. Game Apps in the $4.99 range need to have an expansive feature set and lots of polish. That is, they need to look good and provide a great deal of value for the user. While users won’t know if they got their money’s worth until they install the app, users will be quick to leave negative feedback if they feel they’ve been ripped off, which will likely turn off future customers. For the pay per download model we will set the price at FREE. For the fully subscript Game we will set the price at $0.99-$4.99 6.3.3.1 Most popular Apple App Store categories in January 2015 Gaming on mobile devices is popular throughout many demographics and the nature of mobile apps facilitates free-to-play and fermium models of monetization. Educational, entertainment and lifestyle apps also benefit from mobile availability, as they can offer users compact pieces of information. Furthermore, business apps profit from the Smartphone’s ubiquity in almost all professional areas and thus are used to facilitate transactions or the exchange of information. [7] Page 20 Game Loot Network Figure 4: Most popular Apple App Store categories in January 2015, by share of available apps [7] Page 21 Game Loot Network 6.4 Sales Strategy This part considers our business model choice. A business model describes how an organization creates, delivers, and captures value and generates revenue, or in other words how will we make money through our application. Monetizing an application can be the single most challenging aspect when undertaking a mobile venture. How to price our application? Will our application be free for users or will they be charged? What is the appropriate pricing model for our application? These are some of the questions which will be reviewed here. Game Loot Network anticipates that sales will start during the third month. The first two months of operation will have flat sales. After that point, sales will increase. There are about 4 existing different business models today in the mobile app business: • • • • i. ii. iii. iv. In-app advertising In-app purchasing Fermium Subscription In-app advertising: In the advertising model, users download the app for free. Instead, ads are placed (usually banners, but not always – lots of innovative new ad types are available these days) and we get paid by advertisers when users click the ads In-app purchasing: With this model the application it can be free (but is not required) and the main revenue stream is generated through the in-app purchase. The applications consist of an initial usable part and a part that is only usable if the customer decides to buy it. For example, a game has five free levels and to play the sixth level the user has to buy the level. Fermium: These applications are free. The objective here remains to make money. Free is a very powerful motivator to get people to download a product. This model generates income only from other business activities, such as: Subscription: A subscription means the customer has access to a service or product as long as a fee is paid. The fee is paid for a limited period of time; if the time is complete the customer has to re-initiate the subscription. Magazines or newspapers work with this model. 6.5 Sales Forecast Sales will come from three sources: 1. Game downloads - this includes free and paid downloads. The free downloads are monetized from embedded advertising sponsorships 2. Embedded Advertising Sponsorships - ads embedded in both free and paid games 3. Custom games developed for companies - this would be consulting projects to develop iPhone, Blackberry and Android promotional games Page 22 Game Loot Network Table 6: Sales Forecast Sales Forecast Sales Game Downloads Game Sponsorships Custom Game for Corporations Total Sales Direct Cost of Sales Game Downloads Game Sponsorships Year 1 Year 2 Year 3 $60,000 $156,000 $197,000 $413,000 $97,000 $250,000 $380,000 $727,000 $220,000 $380,000 $680,000 $1,280,000 Year 1 $25,400 $47,900 Year 2 $35,800 $75,500 Year 3 $52,500 $100,000 Table 7: Chart- Sales Monthly 4 7 5 1 2 11 3 6 8 9 Month 12 10 Sales Monthly $80,000 $70,000 $60,000 Game Downloads $50,000 Game Sponsorships $40,000 Custom Game for Corporations $30,000 $20,000 $10,000 $0 Page 23 Game Loot Network Table 8: Sales by Year Sales by Year $1,200,000 $1,000,000 Game Downloads $800,000 Game Sponsorships $600,000 Custom Game for Corporations $400,000 $200,000 $0 Year 1 Year 2 Year 3 6.5 Milestones The accompanying table lists important program milestones, with dates and managers in charge, and budgets for each. The milestone schedule indicates our emphasis on planning for implementation. What the table doesn't show is the commitment behind it. Our business plan includes complete provisions for plan-vs.-actual analysis, and we will hold monthly follow-up meetings to discuss the variance and course corrections. Table 9- Milestones Milestones Milestone Office Setup Equipment/Network Setup Game App Development Marketing Totals Start Date 5/1/2015 5/1/2015 End Date 5/20/2015 5/20/2015 Budget $10,000 $100,000 Department Admin Admin 5/20/2015 7/5/2015 7/4/2015 8/10/2015 $50,000 $5,000 $165,000 Technical Marketing 7.0 Management Summary Lance Baker will be the Owner of the company 7.1 Personnel Plan Game Loot Network staff is as follows: Page 24 Game Loot Network Table 10: Personnel Personnel Plan Year 1 $16,000 $13,000 $9,000 3 $38,000 Developer-1 Developer-2 Admin Total People Total Payroll Year 2 $20,000 $16,000 $11,000 3 $47,000 Year 3 $25,000 $20,000 $15,000 3 $60,000 8.0 Financial Plan The following is the financial plan for Game Loot Network. The various topic tables display annual figures for the first three years. Monthly figures for the first year are presented in the appendix. 8.1 Start-up Funding Table 11: Start-up Funding Start-up Funding Start-up Expenses to Fund Start-up Assets to Fund Total Funding Required $160,000 $340,000 $500,000 Assets Non-cash Assets from Start-up Cash Requirements from Start-up Additional Cash Raised Cash Balance on Starting Date Total Assets Liabilities and Capital Liabilities Current Borrowing Long-term Liabilities Accounts Payable (Outstanding Bills) Other Current Liabilities (interest-free) Total Liabilities Capital Planned Investment Lance Baker Additional Investment Requirement Total Planned Investment $50,000 $290,000 $0 $290,000 $340,000 $0 $0 $0 $0 $0 $400,000 $100,000 $500,000 Loss at Start-up (Start-up Expenses) Total Capital ($160,000) $340,000 Total Capital and Liabilities $340,000 Total Funding $500,000 Page 25 Game Loot Network 8.2 Important Assumptions The Company has based its pro forma financial statements on the following: • • Game Loot Network will have an annual sales growth rate of 1%. The owner will acquire $250,000 USD of equity funds to develop the business 8.3 Break-even Analysis The following table and chart show our Break-even Analysis. Table 12: Break-even Analysis Break-even Analysis Monthly Revenue Break-even $13,777 Assumptions: Average Percent Variable Cost Estimated Monthly Fixed Cost 45% $7,512 Figure 5: Chart: Break-even Analysis Break-even Analysis $4,000 $2,000 $0 ($2,000) ($4,000) ($6,000) $0 $4,000 $2,000 $8,000 $6,000 $12,000 $10,000 Page 26 $16,000 $14,000 $20,000 $18,000 $22,000 Game Loot Network 8.4 Projected Profit and Loss The following table and charts highlight the projected profit and loss for three years. Table 13: Profit and Loss Pro Forma Profit and Loss Sales Direct Cost of Sales Other Production Expenses Total Cost of Sales Year 1 $413,000 $187,800 $0 $187,800 Year 2 $727,000 $311,300 $0 $311,300 Year 3 $1,280,000 $412,500 $0 $412,500 Gross Margin Gross Margin % $225,200 54.53% $415,700 57.18% $867,500 67.77% Expenses Payroll Other Expenses Depreciation Leased Equipment Utilities Insurance Rent Payroll Taxes Other $38,000 $0 $9,996 $0 $4,800 $3,600 $18,000 $15,750 $0 $47,000 $60,000 $10,000 $0 $4,800 $3,600 $18,000 $31,500 $0 $10,000 $0 $4,800 $3,600 $18,000 $55,500 $0 Total Operating Expenses $90,146 $114,900 $151,900 $135,054 $145,050 $0 $40,516 $300,800 $310,800 $0 $90,240 $715,600 $725,600 $0 $214,680 $94,538 22.89% $210,560 28.96% $500,920 39.13% Profit Before Interest and Taxes EBITDA Interest Expense Taxes Incurred Net Profit Net Profit/Sales Page 27 Game Loot Network Figure 6: Chart- Profit Monthly Profit Monthly $24,000 $21,000 $18,000 $15,000 $12,000 $9,000 $6,000 $3,000 $0 Month 1 Month 7 Month 5 Month 3 Month 2 Month 4 Month 6 Month 11 Month 9 Month 8 Month 10 Figure 7: Profit Yearly Profit Yearly $500,000 $400,000 $300,000 $200,000 $100,000 $0 Year 1 Year 2 Page 28 Year 3 Month 12 Game Loot Network Figure 8: Chart- Gross Margin Monthly Gross Margin Monthly $44,000 $40,000 $36,000 $32,000 $28,000 $24,000 $20,000 $16,000 $12,000 $8,000 $4,000 $0 Month 1 Month 7 Month 5 Month 3 Month 2 Month 4 Month 6 Month 11 Month 9 Month 8 Month 10 Figure 9: Chart- Gross Margin Yearly Gross Margin Yearly $900,000 $800,000 $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0 Year 1 Year 2 Page 29 Year 3 Month 12 Game Loot Network 8.5 Projected Cash Flow The following table and chart highlights the projected cash flow for three years. Table 14: Table- Cash Flow Pro Forma Cash Flow Year 1 Year 2 Year 3 Cash from Operations Cash Sales Cash from Receivables Subtotal Cash from Operations $103,250 $211,075 $314,325 $181,750 $470,228 $651,978 $320,000 $827,876 $1,147,876 Additional Cash Received Sales Tax, VAT, HST/GST Received New Current Borrowing New Other Liabilities (interest-free) New Long-term Liabilities Sales of Other Current Assets Sales of Long-term Assets New Investment Received Subtotal Cash Received $0 $0 $0 $0 $0 $0 $0 $314,325 $0 $0 $0 $0 $0 $0 $0 $651,978 $0 $0 $0 $0 $0 $0 $0 $1,147,876 Year 1 Year 2 Year 3 Expenditures from Operations Cash Spending Bill Payments Subtotal Spent on Operations $38,000 $225,869 $263,869 $47,000 $466,275 $513,275 $60,000 $688,562 $748,562 Additional Cash Spent Sales Tax, VAT, HST/GST Paid Out Principal Repayment of Current Borrowing Other Liabilities Principal Repayment Long-term Liabilities Principal Repayment Purchase Other Current Assets Purchase Long-term Assets Dividends Subtotal Cash Spent $0 $0 $0 $0 $0 $0 $0 $263,869 $0 $0 $0 $0 $0 $0 $0 $513,275 $0 $0 $0 $0 $0 $0 $0 $748,562 Net Cash Flow Cash Balance $50,456 $340,456 $138,703 $479,159 $399,314 $878,474 Cash Received Expenditures Page 30 Game Loot Network Figure 10: Chart- Cash 4 7 5 1 2 11 Month 12 3 6 8 9 10 Cash $320,000 $280,000 $240,000 Net Cash Flow $200,000 Cash Balance $160,000 $120,000 $80,000 $40,000 $0 Page 31 Game Loot Network 8.6 Projected Balance Sheet The following table highlights the projected balance sheet for three years. Table 15: Table- Balance Sheet Pro Forma Balance Sheet Year 1 Year 2 Year 3 Current Assets Cash Accounts Receivable Other Current Assets Total Current Assets $340,456 $98,675 $10,000 $449,131 $479,159 $173,697 $10,000 $662,856 $878,474 $305,821 $10,000 $1,194,294 Long-term Assets Long-term Assets Accumulated Depreciation Total Long-term Assets Total Assets $40,000 $9,996 $30,004 $479,135 $40,000 $19,996 $20,004 $682,860 $40,000 $29,996 $10,004 $1,204,298 Year 1 Year 2 Year 3 Current Liabilities Accounts Payable Current Borrowing Other Current Liabilities Subtotal Current Liabilities $44,597 $0 $0 $44,597 $37,762 $0 $0 $37,762 $58,281 $0 $0 $58,281 Long-term Liabilities Total Liabilities $0 $44,597 $0 $37,762 $0 $58,281 $500,000 ($160,000) $94,538 $434,538 $479,135 $500,000 ($65,462) $210,560 $645,098 $682,860 $500,000 $145,098 $500,920 $1,146,018 $1,204,298 $434,538 $645,098 $1,146,018 Assets Liabilities and Capital Paid-in Capital Retained Earnings Earnings Total Capital Total Liabilities and Capital Net Worth Page 32 Game Loot Network 8.7 Business Ratios Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 7372, Computer Programming Services, are shown for comparison. Table 16: Table- Ratios Ratio Analysis Year 1 Year 2 Year 3 n.a. 76.03% 76.07% Industry Profile 4.51% 20.59% 2.09% 93.74% 6.26% 100.00% 25.44% 1.46% 97.07% 2.93% 100.00% 25.39% 0.83% 99.17% 0.83% 100.00% 19.93% 69.92% 91.46% 8.54% 100.00% 9.31% 0.00% 9.31% 90.69% 5.53% 0.00% 5.53% 94.47% 4.84% 0.00% 4.84% 95.16% 43.45% 29.51% 72.97% 27.03% 100.00% 54.53% 83.34% 100.00% 57.18% 85.26% 100.00% 67.77% 82.93% 100.00% 79.91% 56.99% 4.30% 32.70% 3.95% 41.38% 3.11% 55.91% 2.49% -23.10% Main Ratios Current Quick Total Debt to Total Assets Pre-tax Return on Net Worth Pre-tax Return on Assets 10.07 10.07 9.31% 31.08% 28.19% 17.55 17.55 5.53% 46.63% 44.05% 20.49 20.49 4.84% 62.44% 59.42% 1.71 1.68 72.97% -86.50% -23.38% Additional Ratios Net Profit Margin Return on Equity Year 1 22.89% 21.76% Year 2 28.96% 32.64% Year 3 39.13% 43.71% n.a n.a 3.14 54 6.06 27 0.86 3.14 91 12.17 33 1.06 3.14 91 12.17 25 1.06 n.a n.a n.a n.a n.a Sales Growth Percent of Total Assets Accounts Receivable Other Current Assets Total Current Assets Long-term Assets Total Assets Current Liabilities Long-term Liabilities Total Liabilities Net Worth Percent of Sales Sales Gross Margin Selling, General & Administrative Expenses Advertising Expenses Profit Before Interest and Taxes Activity Ratios Accounts Receivable Turnover Collection Days Accounts Payable Turnover Payment Days Total Asset Turnover Page 33 Game Loot Network Debt Ratios Debt to Net Worth Current Liab. to Liab. Liquidity Ratios Net Working Capital Interest Coverage Additional Ratios Assets to Sales Current Debt/Total Assets Acid Test Sales/Net Worth Dividend Payout 0.10 1.00 0.06 1.00 0.05 1.00 n.a n.a $404,534 0.00 $625,094 0.00 $1,136,014 0.00 n.a n.a 1.16 9% 7.86 0.95 0.00 0.94 6% 12.95 1.13 0.00 0.94 5% 15.24 1.12 0.00 n.a n.a n.a n.a n.a Page 34 Appendix Table: Sales Forecast Sales Forecast Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 $1,500 $3,000 $4,000 $8,500 $2,000 $4,000 $5,000 $11,000 $2,500 $5,000 $6,000 $13,500 $3,500 $8,000 $8,000 $19,500 $4,000 $9,000 $10,000 $23,000 $4,000 $11,000 $15,000 $30,000 $5,000 $13,000 $18,000 $36,000 $6,500 $14,000 $20,000 $40,500 $7,000 $16,000 $22,000 $45,000 $7,500 $18,000 $27,000 $52,500 $8,000 $20,000 $30,000 $58,000 $8,500 $35,000 $32,000 $75,500 Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 $400 $600 $1,000 $1,200 $1,600 $2,000 $2,500 $2,800 $3,000 $3,200 $3,500 $3,600 Game Sponsorships $1,000 $1,200 $1,800 $2,400 $2,600 $3,400 $4,000 $5,000 $5,500 $6,000 $7,000 $8,000 Custom Game for Corporations $2,500 $4,000 $5,000 $5,500 $6,000 $7,500 $9,000 $10,000 $12,000 $15,000 $18,000 $20,000 Subtotal Direct Cost of Sales $3,900 $5,800 $7,800 $9,100 $10,200 $12,900 $15,500 $17,800 $20,500 $24,200 $28,500 $31,600 Sales Game Downloads Game Sponsorships Custom Game for Corporations Total Sales Direct Cost of Sales Game Downloads 0% 0% 0% Page 1 Appendix Table: Personnel Personnel Plan Developer-1 Developer-2 Admin Total People Total Payroll 0% 0% 0% Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 $1,000 $0 $0 3 $1,000 $0 $0 3 $1,000 $0 $0 3 $1,000 $1,000 $1,000 3 $1,000 $1,000 $1,000 3 $1,000 $1,000 $1,000 3 $1,000 $1,000 $1,000 3 $1,000 $1,000 $1,000 3 $2,000 $2,000 $1,000 3 $2,000 $2,000 $1,000 3 $2,000 $2,000 $1,000 3 $2,000 $2,000 $1,000 3 $1,000 $1,000 $1,000 $3,000 $3,000 $3,000 $3,000 $3,000 $5,000 $5,000 $5,000 $5,000 Page 2 Appendix Table: Profit and Loss Pro Forma Profit and Loss Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 Sales $8,500 $11,000 $13,500 $19,500 $23,000 $30,000 $36,000 $40,500 $45,000 $52,500 $58,000 $75,500 Direct Cost of Sales $3,900 $5,800 $7,800 $9,100 $10,200 $12,900 $15,500 $17,800 $20,500 $24,200 $28,500 $31,600 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $3,900 $5,800 $7,800 $9,100 $10,200 $12,900 $15,500 $17,800 $20,500 $24,200 $28,500 $31,600 Other Production Expenses Total Cost of Sales Gross Margin $4,600 $5,200 $5,700 $10,400 $12,800 $17,100 $20,500 $22,700 $24,500 $28,300 $29,500 $43,900 Gross Margin % 54.12% 47.27% 42.22% 53.33% 55.65% 57.00% 56.94% 56.05% 54.44% 53.90% 50.86% 58.15% $1,000 $1,000 $1,000 $3,000 $3,000 $3,000 $3,000 $3,000 $5,000 $5,000 $5,000 $5,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $833 $833 $833 $833 $833 $833 $833 $833 $833 $833 $833 $833 Expenses Payroll Other Expenses Depreciation Leased Equipment Utilities Insurance Rent Payroll Taxes Other Total Operating Expenses Profit Before Interest and Taxes EBITDA Interest Expense Taxes Incurred Net Profit Net Profit/Sales 15% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $400 $400 $400 $400 $400 $400 $400 $400 $400 $400 $400 $400 $300 $300 $300 $300 $300 $300 $300 $300 $300 $300 $300 $300 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $2,250 $0 $2,250 $0 $2,250 $0 $2,250 $0 $2,250 $0 $2,250 $0 $2,250 $0 $4,033 $4,033 $4,033 $6,033 $6,033 $8,283 $8,283 $8,283 $10,283 $10,283 $10,283 $10,283 $567 $1,167 $1,667 $4,367 $6,767 $8,817 $12,217 $14,417 $14,217 $18,017 $19,217 $33,617 $1,400 $2,000 $2,500 $5,200 $7,600 $9,650 $13,050 $15,250 $15,050 $18,850 $20,050 $34,450 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $170 $350 $500 $1,310 $2,030 $2,645 $3,665 $4,325 $4,265 $5,405 $5,765 $10,085 $397 $817 $1,167 $3,057 $4,737 $6,172 $8,552 $10,092 $9,952 $12,612 $13,452 $23,532 4.67% 7.43% 8.64% 15.68% 20.60% 20.57% 23.76% 24.92% 22.12% 24.02% 23.19% 31.17% Page 3 Appendix Table: Cash Flow Pro Forma Cash Flow Month 1 Month 2 Month 3 Month 4 Month 5 $2,125 $2,750 $3,375 $4,875 $5,750 $0 $213 $6,438 $8,313 $10,275 $2,125 $2,963 $9,813 $13,188 $16,025 $0 $0 $0 $0 $0 $0 $0 $0 New Other Liabilities (interest-free) $0 $0 $0 New Long-term Liabilities $0 $0 $0 Sales of Other Current Assets $0 $0 Sales of Long-term Assets $0 New Investment Received Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 $7,500 $9,000 $10,125 $11,250 $13,125 $14,500 $18,875 $14,713 $17,425 $22,650 $27,113 $30,488 $33,938 $39,513 $22,213 $26,425 $32,775 $38,363 $43,613 $48,438 $58,388 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $2,125 $2,963 $9,813 $13,188 $16,025 $22,213 $26,425 $32,775 $38,363 $43,613 $48,438 $58,388 Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 $1,000 $1,000 $1,000 $3,000 $3,000 $3,000 $3,000 $3,000 $5,000 $5,000 $5,000 $5,000 $209 $6,339 $8,422 $10,570 $12,671 $14,616 $20,116 $23,714 $26,663 $29,376 $34,210 $38,962 $1,209 $7,339 $9,422 $13,570 $15,671 $17,616 $23,116 $26,714 $31,663 $34,376 $39,210 $43,962 Sales Tax, VAT, HST/GST Paid Out $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Principal Repayment of Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Other Liabilities Principal Repayment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Long-term Liabilities Principal Repayment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Purchase Other Current Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Purchase Long-term Assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Dividends $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $1,209 $7,339 $9,422 $13,570 $15,671 $17,616 $23,116 $26,714 $31,663 $34,376 $39,210 $43,962 Cash Received Cash from Operations Cash Sales Cash from Receivables Subtotal Cash from Operations Additional Cash Received Sales Tax, VAT, HST/GST Received New Current Borrowing Subtotal Cash Received Expenditures 0.00% Expenditures from Operations Cash Spending Bill Payments Subtotal Spent on Operations Additional Cash Spent Subtotal Cash Spent Net Cash Flow $916 ($4,377) $391 ($383) $354 $4,597 $3,309 $6,061 $6,699 $9,236 $9,227 $14,425 Cash Balance $290,916 $286,539 $286,930 $286,547 $286,901 $291,498 $294,807 $300,868 $307,568 $316,804 $326,031 $340,456 Page 4 Appendix Table: Balance Sheet Pro Forma Balance Sheet Assets Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 $290,000 $0 $10,000 $300,000 $290,916 $6,375 $10,000 $307,291 $286,539 $14,413 $10,000 $310,952 $286,930 $18,100 $10,000 $315,030 $286,547 $24,413 $10,000 $320,959 $286,901 $31,388 $10,000 $328,289 $291,498 $39,175 $10,000 $340,673 $294,807 $48,750 $10,000 $353,557 $300,868 $56,475 $10,000 $367,343 $307,568 $63,113 $10,000 $380,680 $316,804 $72,000 $10,000 $398,804 $326,031 $81,563 $10,000 $417,593 $340,456 $98,675 $10,000 $449,131 $40,000 $0 $40,000 $340,000 $40,000 $833 $39,167 $346,458 $40,000 $1,666 $38,334 $349,286 $40,000 $2,499 $37,501 $352,531 $40,000 $3,332 $36,668 $357,627 $40,000 $4,165 $35,835 $364,124 $40,000 $4,998 $35,002 $375,675 $40,000 $5,831 $34,169 $387,726 $40,000 $6,664 $33,336 $400,679 $40,000 $7,497 $32,503 $413,183 $40,000 $8,330 $31,670 $430,474 $40,000 $9,163 $30,837 $448,430 $40,000 $9,996 $30,004 $479,135 Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 Starting Balances Current Assets Cash Accounts Receivable Other Current Assets Total Current Assets Long-term Assets Long-term Assets Accumulated Depreciation Total Long-term Assets Total Assets Liabilities and Capital Current Liabilities Accounts Payable Current Borrowing Other Current Liabilities Subtotal Current Liabilities $0 $0 $0 $0 $6,061 $0 $0 $6,061 $8,072 $0 $0 $8,072 $10,150 $0 $0 $10,150 $12,190 $0 $0 $12,190 $13,949 $0 $0 $13,949 $19,329 $0 $0 $19,329 $22,828 $0 $0 $22,828 $25,689 $0 $0 $25,689 $28,241 $0 $0 $28,241 $32,920 $0 $0 $32,920 $37,425 $0 $0 $37,425 $44,597 $0 $0 $44,597 Long-term Liabilities Total Liabilities $0 $0 $0 $6,061 $0 $8,072 $0 $10,150 $0 $12,190 $0 $13,949 $0 $19,329 $0 $22,828 $0 $25,689 $0 $28,241 $0 $32,920 $0 $37,425 $0 $44,597 $500,000 ($160,000) $0 $340,000 $340,000 $500,000 ($160,000) $397 $340,397 $346,458 $500,000 ($160,000) $1,214 $341,214 $349,286 $500,000 ($160,000) $2,381 $342,381 $352,531 $500,000 ($160,000) $5,438 $345,438 $357,627 $500,000 ($160,000) $10,175 $350,175 $364,124 $500,000 ($160,000) $16,346 $356,346 $375,675 $500,000 ($160,000) $24,898 $364,898 $387,726 $500,000 ($160,000) $34,990 $374,990 $400,679 $500,000 ($160,000) $44,942 $384,942 $413,183 $500,000 ($160,000) $57,554 $397,554 $430,474 $500,000 ($160,000) $71,006 $411,006 $448,430 $500,000 ($160,000) $94,538 $434,538 $479,135 $340,000 $340,397 $341,214 $342,381 $345,438 $350,174 $356,346 $364,898 $374,990 $384,942 $397,554 $411,006 $434,538 Paid-in Capital Retained Earnings Earnings Total Capital Total Liabilities and Capital Net Worth Page 5 Appendix References: 1. 2. 3. 4. 5. 6. 7. businesswire.com/news/home/20140108005794/en/UMeWorld-Acquires-80-Stake-Mobile-Game-Company#.Uw-Gk_mSzLo http://www.newzoo.com/trend-reports/free-global-trend-report-2012-2016/ http://www.statista.com/topics/1906/mobile-gaming/ http://www.bigfishgames.com/blog/2014-global-gaming-stats-whos-playing-what-and-why/ http://rjionline.org/news/2012-rji-mobile-media-news-consumption-survey-executive-summary http://www.newzoo.com/free/rankings/top-25-companies-by-game-revenues/ http://www.statista.com/statistics/270291/popular-categories-in-the-app-store/ Page 6