ADESOYE ADENIJI

202023877
MBA

ENOCH & SONS SUPER BUSS 349

SPRING 2020
DEALERSHIP BUSINESS
AMERICAN UNIVERSITY OF BEIRUT

PLAN
ABSTRACT

This project is centered on developing a business plan for a typical startup. Many
often confuse a startup with a traditional small business. In the business world, the
two are different with respect to growth potential, market niche or market size, and
financing requirement. A barber shop is a typical example of traditional small
business while Google started as a startup. In the case of a startup, the target
market is extremely large and capital investment for financing comes from
unknown investors. A traditional small business, on the other hand, relies on loans
for financing and the target market is small. The growth rate projections in terms
of sales is also very high for startups.

Enoch and Sons Engineering started some 10 years ago with repairs of electronic
gadgets where we are able to raise the necessary capital to become an accredited
partner of Multichoice Nigeria in 2013 to be selling DStv & GOtv. Having built a
satisfactory reputation with Multichoice to be excellent at service delivery, Enoch
and Sons is transitioning from a small traditional business to a startup (Super
Dealer) because we are moving from our formal location (a small geographic
market just within a street line in Ajah town) to Epe town. Our new market niche
covers the entire municipality of Epe and not just a street as it was in Ajah; other
dealers of Multichoice are located in remote municipalities farther away from Epe.
Our growth potential is very high because we now possess a new subscription
payment platform for subscribers which is very fast, effective and efficient. We will
also be acting as sole distributor (supplier) to other DStv retailers within Epe
catchment.
 COMPANY PROFILE
ENOCH & SONS ENGINEERING is one of the largest independent pay TV
(DStv) & Internet service retailer (Spectranet) in Lagos, Nigeria. Enoch was
formally incorporated in the year 2010 and accredited by Multichoice in the year
2013. The company has since then had good years of business engagement with
good prospect for growth. The company has a clear understanding of market
segmentation, business positioning and the importance of going the extra mile at
delivering value to customers which in turn populate the base for more revenue.

By engaging skilled installers and facilitating training program on a continuous

basis for them, our DStv subscribers enjoy improved clarity in television reception
and an increasingly broad array of exciting information and entertainment
programming. Whether it is Cable or Internet, ultimately these businesses are about
delivering service. Anyone can produce a product, but not everyone can deliver it
the way we do. We understand this and therefore thrive on the fact that we have
achieved and set standards, in providing the very best in DStv services &
Broadband Internet.

ENOCH & SONS as an indigenous company, is a top performing branded store

with office location on Ado road, Ajah. The company takes pride in her location,
wealth of experience and the networking ability of the handler to deeply penetrate
the spread of Ajah and inward Badore for sales while offering excellent customers
service to ensure retention.

Given the company’s 8years experience with Multichoice and haven’t built a
sustainable structure through which services is being rendered to existing and
prospective customers, an upgrade of the present status is inevitable to be able to
accommodate the high footfalls, resolve issues, and ultimately make the
company/office a one stop shop for our esteemed customers.

By modifying our organizational structure; increasing the emoluments of

employees, we will ensure that we meet the following goals: increase in sales from
our current N51,000,000 to N150,000,000 annually, strengthen the brand’s market
share, and guarantee penetration and retention within our sales territory.
Our mission is to provide valued services on a long-term basis and to establish
continued relationship based on trust and performance with our clients across the
different levels of the society

Enoch and Sons vision for the future is to deliver even more advanced services to
the customers including video-on-demand and interactive subscription, digital
cable television service through, conditional access and IPTV, Voice over IP,
streaming video on demand with high-speed Internet data connectivity as well as
many other exciting & innovative services.

This business plan further enhances our quest at focusing on adding values to our
target markets while building a robust structure to support all activities including
corporate business and high-end home office users, in our horizontal market.

The Market

Digital migration is a key factor for the Pay-Tv industry’s expected exponential
growth as embraced by the Nigeria government and that has been one of the most
highlighted aspects of new business in the marketplace today. ENOCH & SONS
aims to tap into a section of this market in Epe and expects to be able to strengthen
its market share in all its allocated catchment areas.

We shall provide our customers with DSTV and GOTV systems and provide
comfortable environment (office) for support services. To successfully stay
competitive, we will focus on the future trends in the industry to position ourselves
to become dominant in our sales territory.

Digital Services Market Segments and Opportunities

 Source: frost.com

Strategy and Implementation

1. We aim to liberate the hinterlands. Epe being the locations of our

proposed dealership, ENOCH & SONS will take the digital experience
beyond the borders of Epe reaching further to the hinterlands and populating
our data base for an increased revenue, while giving people’s life a meaning.
Ensuring a complete customer life cycle is central to us, and as such, we will
not just sell the devices and services to the customers and leave it at that. We
will communicate with customers on an ongoing basis with important
information about the product or service which has been delivered.
2. Retention: The future of this business is retention and we at ENOCH takes
relationship building around our customers a priority to guarantee recurring
income, we have taken it upon ourselves to stay close to our customers and
ensure that they make good use of our services seamlessly.
3. Target markets. ENOCH & SONS operates in a perfectly competitive
market where demand is highly elastic, and product is horizontally
differentiated from others i.e. our sales are highly dependent on our
geographic locations (proximity) to our customers and that of other
Multichoice dealers.

BUSINESS DESCRIPTION

Our business concept is to market the complete line of DSTV and GOTV systems
including but not limited to;
  Decoders and other installation accessories
 Subscription collection
 Subscription recharge cards
 Customer service related issues
 After sales support services

TARGET MARKET

Our target market will include but is not limited to existing and potential
subscribers in Epe and Ado road. We envisage generating and managing more than
15,000 (Fifteen Thousand) subscribers and to further strengthen Multichoice’s
market share in these locations.

Figure 1

Financial Projections

ENOCH & SONS company expects to achieve the projected figures in the table
below in the first year of Dealership engagement.

One Year Financial Projection

Details Projection (=N=) Remark
Hardware Sales 150,000,000  
Subscription Collection 200,000,000 Presently 70million in 6months
Other Services 50,000,000  
Total 400,000,000 Four hundred million
Market Needs

Excellent service delivery is the core of our business, and the most important
market needs are support, service, training, and installation, in that order. One of
the key points of our strategy is to deliver these services to our allocated
market/catchment areas through our well-trained staff.

Competitive Edge

Our competitive edge is our positioning as a strategic ally with our clients, who are
clients more than customers. By building a business based on long-standing
relationships with satisfied clients, we simultaneously build defenses against
competition. The longer the relationship stands, the more we help our clients
understand what we offer them and why they need it.

Sales Strategy

 We need to sell the brand and not just the product. We will sell DSTV
and GOTV as brands and not products.
 We must sell our service and support. The hardware is like the Path, and
the support, service, software services and training are the Path Finder. We
need to serve our customers with what they really need.

People (Personnel Plan)

Enoch & Sons management skill is excellent, and this is proven in the recent
award that we received from Multichoice to be the best in sales and service
delivery in Ajah region. The management team was instituted seven years ago and
has shown strong commitment for sustainable development of the company and the
environment. To be accepted as operation manager at Enoch & Sons, candidates
must possess bachelor’s degree in a relevant field like engineering or business with
7 years of working experience. The installers are accepted after completing a
diploma program from an accredited institution, and they are promoted each year
until they become a partner of our company. ENOCH & SONS Company
structure will have a clear line between the operation and sales staff to give room
for effectiveness. Staffing for the divisions will include:

OPERATIONS

 Business Owner Rep

  Business Manager

 Operations Supervisor

 Technical Support Staff

 Accountant

 Cashier

 Customer service Reps (4)

 Installers (4)

 Store Keeper

SALES’

 Sales Supervisor

 Direct Sales Agents (4)

DIGITAL TELEVISION SERVICE INDUSTRY ANALYSIS

During 2015, Nigeria’s regulatory body, the National Broadcasting Commission

(NBC), signed an agreement with Inview Technologies for the provision of a
national STB software system. This agreement will lead to commonality in all
digital television services in the country. The VoD market is competitive with
more than 10 providers. iROKOtv is the most popular service in Nigeria, mainly
due to its Nollywood content.

The pay-TV market is fragmented among three big providers and many small
providers. StarTimes is the leading pay-TV provider. Partnerships between local
pay-TV providers and international media providers are enabling pay-TV providers
to strengthen the quality of their international content. For instance, Montage has
partnered with Fox International Channels (FIC) to offer more variety in its
content. The Nigerian pay-TV market is growing slowly with affordability holding
back the uptake of all forms of service.
MultiChoice (through DStv) enjoyed a monopoly for many years until StarTimes
entered the market in 2010. Apart from MultiChoice’s exclusive rights to CNN,
EPL, and Champions league, the Mexican television network known as
Telemundo, which is available on the MultiChoice platform, has created a lot of
interest among Nigerians. However, the provider’s high prices were increasingly
unaffordable for Nigerians. There is also growing interest in VoD through smaller
providers and network operators looking to boost the average revenue per user.
iROKOtv has the largest online VoD content catalogue with more than 5,000
Nollywood movies, giving it a competitive edge. iROKOtv has also developed
tailor-made services for both feature phone and smartphone users, offering these
services both on websites and mobile platforms. In late 2015, the country’s largest
mobile operator, MTN Nigeria, paid $170 million for a DTT license from the
NBC. This will enable the operator to further diversify its services. KairosWebTV
is a Web TV platform for emerging and aspiring entrepreneurs and start-ups. It
provides news and insights, technology trends, events, edutainment, skits, and
online digital training. The service is configured to save users’ data while allowing
seamless viewing through 2G, 3G, or 4G/LTE networks. The key challenge faced
by providers is the underdeveloped infrastructure and the high cost of operations in
Nigeria. As a result, services are priced higher, hampering market growth. This
also explains the low TV penetration in Nigeria.

Type of market Avg No Of Most Popular Popular Content Of

Competitors In This Competitor In This The Most Powerful
Market Niche Market Niche Competitor In This
Market Niche
VoD 10 iROKOtv Nollywood
Pay TV 3 StarTimes Bundesliga
Pay TV 3 Multichoice EPL, Champions
League
Web TV 1 KairoWebTV Edutainment
Table 1
 Figure 2

Source: ses.com

Figure 3

Multichoice Dealers’ Market Analysis Using Porter five Forces.

1. Threat of new entrants in the sector is low:

This is because the cost of startup especially as an investor is high. In addition,
stringent regulations of Multichoice to dealers about geographic market boundary
give room for monopoly.

2. Threat of substitutes is low

Although the advent of new technologies such as Internet TV and Video Streaming
Services are continually posing great threats to DStv and GOTV, high switching
cost to these services keeps the threat of substitute low. In addition, the unrivaled
soccer content of DSTV also give us a competitive edge among other pay TV
competitors in our geographic market segment.

3. Bargaining Power of Suppliers is High

There is only one supplier of DSTV in the Pay TV industry (Multichoice), thus,
making the bargaining power of supplier to be high.

4. Bargaining Power of Customers is low.

Most subscribers are price sensitive but are left with no other option than to
subscribe to offers that best suits their pockets. The regulatory agency (National
Broadcasting Commission) plays little or no role in price determination.

5. Rivalry among competitors is high.

There is an intense rivalry among dealers of DStv despite the geographic
differentiation. Though dealers often enjoy monopoly due to the market
segmentation by Multichoice, customers still reserve the right to buy from any
dealer of their choice that provide the best service.

The industry is lucrative. Most people are of the opinion that for any operator to
survive in this industry, attention must be paid to the drivers of the industry which
are Pricing and Content (European football).

Factors PESTEL TREND Implication for Pay TV

Industry
Political The political environment is still A more stable political climate is
somewhat uncertain but has stabilized expected to boost investor confidence
slightly since the 2015 elections. and lead to a growth in pay TV
However, the country is still plagued by infrastructure investment. However,
transparency issues within government this will require a more positive
structures, which President Buhari is economic outlook as well
intent on rooting out
Economic The current oil crisis in Nigeria has Low growth has led to slow investment
driven the Nigerian economy into in Pay TV infrastructure but more
recession. The CBN has tightened its outsourcing of Pay TV services. GOtv
stance on monetary policy in an attempt service is available in about 8 out of 36
to stabilise the economy. states in Nigeria. The purchasing power
of the people for DStv is concentrated
in few states like Lagos, Abuja but
widely low in many other states.
Social Deep-rooted ethnic conflict puts capital The government will need to resolve
investments at risk in certain regions of regional conflicts in rural areas to drive
 Nigeria. private-sector investment in Pay TV.
Technology Up to date technology to deliver quality The emergence of Pay TV has led to
service to customers increase in demand of DStv, GOtv
Legal Regulatory framework in Nigeria is strict Global manufacturers of digital
for foreigners wishing to operate/invest in products are expected to establish
the country. production facilities locally in line with
the country’s drive for local content.
Environmen Nigeria still lacks a sufficient electricity This is to a large extent a set back to
supply to satisfy the demands of its Pay TV industry.
t growing population. A mixture of
expanding grid access and renewable
energy projects has been identified as the
best way to address these issues.

FINANCIAL ANALYSIS

CAPITAL NEEDED AND THE BEST WAY TO RAISE IT

The capital required from us by Multichoice for this upgrade is

N140,100,000naira. Common stock totaled N80,100,00 and external financing
need (Long term debt) is N60,000,000.

 Financing option: we have chosen our financial structure in this way partly
due to the regulations of Corporate Affairs Commission (CAC) guiding the
establishment of public limited companies. In addition, our total equity is
higher than debt because equity carries no repayment obligation and it
provides extra capital that can be used to grow a business.

Product development cost

 Caution fee: N200,000 (one-off payment)

 SMA technology: N200,000,000 (we earn only 2% as commission on income statement)
Cost of goods sold

S/N Products Quantity Cost/unit (N) COGS (N)

Varieties (Q)
1. DStv Explora 1200 37,500 45,000,000
2. GOtv 6429 7000 45,000,000
3. HD DStv Decoder 6618 6800 45,000,000
Total COGS =135,000,000
 Marketing Budget

Transportation for Road Exhibitions (1 year) = N100,000

Signage boards = N150,000
Total =N250,000

Personal Budget

Department No of employees Amount/month

Technical 2 50,000
Store Keeper 1 25,000
Sales 1 25,000
Subcription 2 50,000
Total = N150,000x12 = 1,800,000

Facilities and equipment cost (Fixed Asset):

Office space N150,0000

Bus N1,200,000
Modern installation tools N150,000
Total N1,500,000

General and Administrative expenses

Electricity 100,000 for 1 year

Municipal and legal fees 10,000 for 1 year
Total N110,000

STARTUP CAPITAL

S/ Expense Amount (N)

 N
1. COGS 135,000,000
2. Marketing 250,000
3. Personal budget 1,800,000
4. Facilities & Equipment 1,500,000
5. Gen & Admin 110,000
6. Multichoice caution fee 200,000
7. SMA technology =200,000,000
Startup Capital = 353,860,000

 Current asset = 135,000,000

COST OF CAPITAL
 WACC is 15%

NPV, IRR & PAYBACK

 SCENARIO ANALYSIS

RISK INVOLVED

 Legislative and Policy Risk: the time of final approval of this business plan
by Multichoice is uncertain. In the case of eventual rejection of this business
plan or prolonged approval, both time and money face high risk of being
wasted.
 Volume/Demand risk: we also face the risk that the actual market demand
for the product will not yield the projected sales volume.
  Product risk: Before we came up with the decision of selling DStv
decoders, we almost ditched into the idea of opting for the wrong product;
the probability of picking the wrong product is high. The entrepreneurial
market and products are large, so the ability to explain one’s product, the
problem it solves and why it’s worth investing is much harder than it seems.
 Market risk: Knowing our customer and why, how and where they buy
related products is an essential analysis to perform before launching our
product. What we did – we researched this thoroughly; identified these
routes to market, then built them effectively, in a timely fashion and within
our budget.
 Financial Risk: identifying key business milestones and schedules that
clearly identify the points in time when equity or debt investments are
necessary to reach the next major milestone is a major task.

JUSTIFICATIONS FOR INVESTORS TO JOIN OUR VENTURE

 Cost of capital (WACC) reduces for the years ahead which means our debt
equity mix cannot yield excess capital in the foreseeable future.
 ROE is increasing which indicate improved efficiency in generating profit
for shareholders
 Leveraged ratios (long term debt ratio, etc.) is increasing which means the
company is relying more on debt than equity to finance its operations.
 The current ratio is greater than one which means the company has more
current asset than current liabilities
 The sustainable growth rate is increasing which means the company will
rely more on internal financing than external financing.
 IRR for base case (26%) is greater than the cost of capital (15%) which
mean our project is not destroying value
 There is no optimal capital structure because WACC is reducing at a
reducing rate which is good.

ANNEXES
Enoch Cash Flow as a branded store.

CASH FLOW

2016 2017 2018

Cash Received
Cash from Operations N N N
Cash Sales 12,000,000 17,000,000 19,000,000
Cash from Subscription 24,000,000 28,800,000 32,000,000
Subtotal Cash from Operations 36,000,000 45,800,000 51,000,000
Additional Cash Received
Sales Tax, VAT, HST/GST Received 0 0 0
New Current Borrowing 0 0 0
New Long-term Liabilities 0 0 0
New Investment Received 0 0 0
Subtotal Cash Received 36,000,000 45,800,000 51,000,000
Expenditures
Expenditures from Operations
Overheads 6,300,000 6,700,000 7,000,000
Bill Payments 10,500,000 12,470,000 14,600,000
Other Expenses 2,800,000 3,700,000 4,300,000
Additional Cash Spent 1,300,000 1,800,000 2,200,000
Sales Tax, VAT, HST/GST Paid Out 1,300,000 1,470,000 1,500,000
Principal Repayment of Current
0 0 0
Borrowing
Other Liabilities Principal Repayment 0 0 0
Subtotal Cash Spent 22,200,000 26,140,000 29,600,000
Net Cash Flow 13,800,000 19,660,000 21,400,000

BUSINESS LOCATION

Our business is currently located at;

 Main Office:

 Extension Office:

Bank rate: According to Central Bank of Nigeria, rate ranges from 5-9% of the
loan.
 Source: frost & Sullivan, 2018

LEADING BROADCASTERS IN NIGERIA

 NBC
 Multi-choice
 ipNX