The PRODUCTS of ACT-DYNAMIC
3. Manufacture
and sale of the DYNAMIC computer software
product.
A Mission
3.A.1. Nature and purpose of the business plan.
The purpose is to develop, manufacture and sell the DYNAMIC computer program to end users in the pipeline corrosion control industry.
3.A.2. Ownership
of the concept.
The original idea was conceived by Roger Alexander while in Libya and a broad description of the product was described in an artical published by John Tiratsoo in the mid 80's.
Outcome of the project.
It is hoped that the product can be sold world wide into the oil and gas production and distribution industry. The product will be installed our own teams who will train the clients personnel and offer technical support as an ongoing operation.
How it
will be achieved.
An article has been published by John Tiratsoo in the international magazine 'Corrosion Prevention and Control', which reaches the right targets in the oil and gas industry. We will are preparing a pamphlet on the DYNAMIC project, to be sent to possible users and main pipeline operators world-wide. We hope to interest a major pipeline operator who will sponsor the manufacture of the product in return for the licence to use it when complete. We would market the product in the conventional way within the computer software industry.
3.A.3. Capability
to succeed.
This venture will require a project manager with experience in the production of such packages and a sales manager with experience in the relevant industries. An existing software house could be used to engineer the product, maybe based on a selection of existing software. The capability to succeed will depend on the team recruited for the project.
3.A.4. Functional
capabilities throughout the project duration.
This item will depend on the team management.
3.A.5. Management
information and control systems.
These will be developed by the project manager and his team but are likely to be based on a standard computer software package.
3.B. Sales
3.B.6. The
sales forecast is feasible.
There are pipeline networks in most countries of the world, which are operated by large organisations who would be interested in this product.
3.B.7. The sales forecast take account of the
industry environment and future trends.
There are thousands of miles of buried pipelines which are essential to the economy of the country, and are operated at very high pressures under ground to which the public have access. The operators are not 100% certain of the integrity of these assets and the DYNAMIC package is a step towards ascertaining their exact condition.
3.B.8. The
sales forecasts take account of market pricing volume
and gross margins.
The product will enter the market of dedicated software with limited application and the price must reflect this. It has been estimated that a charge of £150,000 per installation is not unreasonable.
3.B.9. The sales forecasts take account of the likely behaviour of competitors.
There appears to be no competition at present and it will take some time for competition to emerge as the technology which allows the true modelling of the corrosion process has only just been accepted by the academic institutions. It is anticipated that competition will soon emerge and that time must not be wasted in selling the first product. Once this is installed within a large organisation this will be a 'springboard' for further sales which will give any competition a severe disadvantage.
3.B.10. Customer
profile, buying habits and distribution channels.
Potential customers are considered to be large corporate bodies and national organisations producing and developing products in pipeline networks. These organisations buy software direct from developers and co-operate in the production manufacturers on the recommendation of their specialised departments, and it is therefore senior management and senior technical personnel that we must target.
Some sales can be obtained through agents who have a personal connection with the clients in their operating area. The agent can introduce the product where a market need is identified. We will identify such agents and sales networks through consultancy networks which have connections world wide and, maybe through service companies which do not have this speciality within their portfolio.
3.B.11. Historic trends and external factors.
Demand for this type of product is low volume but world-wide. Corrosion control is enhanced by environmental issues, energy conservation and the occurrence of well publicised pipeline failures. Corrosion control activity can be held up by management as a token of long term concern about these issues. Failure to consider new technology could even be regarded as neglect by the media.
Asset condition monitoring is a major concern of such organisations as Shell International who have research projects about this matter. Are presentative of the Shell, Arnhem team was visiting Nigeria when he expressed an interest in a minor feature of the DYNAMIC spreadsheet which I was working on at the time. There is a major trend towards computerisation in the oil and gas industry and this product would fill a place in this trend.
3.B.12. Time
taken to develop the product/service, complete a sale and receive payment.
C. Expenditure
3.c.13. The
expenditure forecast is feasible.
Promotion and management of this product could be enhanced with a greater initial investment and the management of this promotion would be part of the expenditure to be specified. The investor must judge the cost of setting up a company which has this function.
3.c.14. The
expenditure forecast takes account of
likely supplier
behaviour.
3.c.15. Do
the additional working capital requirements reflect the reasonable needs of the new project and
the core business?
This feature will have to be defined by the manager put in place by the initial investor. The present management do not have the financial experience to present this feature in terms which conform to the current conventions.
It is however, obvious that there must be sufficient funds to pay all debts until clients money is flowing into the company in return for the product.
3.C.16. That
the projected product and market expenditure, and
capital expenditure reflects the reasonable requirements
of the business objectives.
Operational
advice from market professionals is an item which will be procured with the investment for this element
of the operation. If the investor thinks that it is a forgone conclusion that this venture
will succeed then there is likely to be many investors
wishing to be included. It is up to the
investors make this judgement, all I can
do is to present the technology as a product for them to market.
3.D. Existing and future funding requirements
3.D.17. The
forecast of trading assets and liabilities appear feasible for a business in its industry
sector.
3.D.18 Terms
and conditions of all proposed
borrowings will be
negotiated with investors.
There are no existing liabilities except to the Technical Director ( the author ) who is the sole source of finance to date.
3.D.19 Full details of the future of the equity structure and managements financial commitment.
This will be negotiated and formalised with the investors.
3.D.20. Details
of drawings and dividends for controlling shareholders and directors.
These will be negotiated and agreed, subject to professional advice between the investors and present directors who are the owners of the intellectual property which constitutes the sole asset of the company.
3.D.21. Interest
and repayments on all borrowings from third parties
must be included in the business plan which is part
of the product of the investment sought at present.
The investor in the present activity must ensure that sufficient funds are provided to secure this issue. It is up to the investor to ensure that his judgement is adequate.
3.D.22 The
funding requirement includes consideration of contingency
amounts.
Normal insurance will be taken out for any of our activities, and we will operate within the constraints of such insurance contracts.
3.D.23 Professional
advice will be utilised to ensure that accounting policies are appropriate
for the industry sector.
The structure of the accounting will continue to be developed with the company accountant.
3.E. Downside
Risk
3.E.24 The
management will understand the risks associated with the project and will be able to
recognise problems, determine
options and take appropriate actions, as it will
be their own funds and experience that they are investing.
As in my own case, I am investing my own intellectual property and expertise, and my future is at risk in any judgement that I make, so I would expect the investor(s) of finance and management expertise to risk their own futures in this venture. It is up to them to decide whether this risk is worth the probable results.
3.E.25. The
management realise that the main purpose of this element of the operation is to raise funds
for, and co- ordinate,
further activities which naturally follow the successful
promotion of the technology.
3.E.26. The
investors should be sufficiently expert to include sensitivity
analysis to indicate what reasonable contingency
funding should be made available.
They should consider at the outset, how much extra money might be required to follow up any unplanned turn of events. This might include a sudden interest by a potential client from overseas, requiring greater funding than that to follow up one from the UK.
3.E.27 The
medium term profit forecasts are reasonable for the sector.
3.F Funding
terms and conditions.
3.F.28 The
requirements of investors will be considered during
negotiations to raise the funds.
In raising this investment it will be necessary to take outside advice which will have to be charged to this investment. It would seem that this puts the investor in total control but this is not so. My own investment is the intellectual property and ability to apply the technology to produce good field results.
3.F.29 The management are aware that they may be required to give investors minority protection rights.
This is my lifetime product in the same way that the funds of the investor are his. It is merely a matter of negotiation to reach protection and a reasonable return for all parties.
3.G Conclusion.
3.G.30 Taken
as a whole the business plan is consistent and credible.
I have not the expertise to determine a realistic cash flow forecast for this operation but I am in a position to realise that I have a truly profitable product after many years of specialised work. It is up to those who are skilled in financial matters to contribute the effort required to formulate a business plan to realise the potential of DYNAMIC to fill a gap in a very lucrative market.
With the proper funding and management there is no reason why this should should not be marketed on a world-wide scale.