Quentech Limited’s Business Plan

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Executive Summary

The smartwatch market in New Zealand is on the rise as more people are finding smartwatch to be more convenient than smartphones. This business proposal reports on Quentech Limited, a startup smartwatch manufacturer and supply company located in New Zealand. Quentech smartwatches is Quentech Limited’s first product with a wide range of healthcare capabilities, including monitoring people’s heartbeat, blood pressure, body temperature, body glucose, as well as lipids. The company plans to sell its watches to the upmarket of the health care industry. The company relies on virtual reality systems and artificial intelligence to build smartwatches that will enable people to know their physical condition anytime, anywhere, thereby revolutionizing the healthcare industry. In addition to the above, this proposal explores the smartwatch market and its associated risks, strategies of marketing, finance, and logistics involved. Quentech smartwatch helps its users save on capital cost by providing several functions accustomed to numerous service providers. The company requires $800,550 as capital investment to begin proper operation. Financial forecasting of the firm, reveals that the enterprise will make approximately $855,450 in its first year of set-up. At the end of the first year, the company projects to earn $1,405,150 in profit.

Business History and Opportunity

The smartwatch industry continuously changes to accommodate new market sectors and innovative trends in numerous sectors, including healthcare. In the latest years, there has been the need for health care smartwatches that combine several functions, for which players in the smartwatch market are still struggling to improve their competences of producing multi-function devices (Tong, 2018). Quentech Limited, through the Quentech smartwatch, provides a clinical application of a smartwatch as an assistive device in this fast-growing market. The company plans on establishing a vibrant market position by offering a matchless value proposition – providing a multi-function device at a reasonable market price.

Quentech Limited intends to realize these goals by applying open-source software and hardware systems, thus decreasing the privacy concerns and opening fixed costs. The company will adopt validated learning, interactive product releases, and a combination of business-hypothesis-driven experimentation to shorten its product development cycle and rapidly discover if our proposed business model is viable. Besides, the enterprise will employ the “Build-Measure-Learn” loop to measure customers’ behaviors, reactions, and response against existing brands, and decide whether to pivot or persevere the idea (Jackson, 2019). Quentech Limited is a privately owned business. Production and distribution take place in New-Zealand for the short term future and global for the long term. The two individuals that co-founded the company are Quentin Zamora and Techira Nikau who head the production and Sales and Marketing departments respectively.

Quentech’s factory sits on 800 square meters of land in Auckland, New Zealand. The smartwatches will be shipped to Techira Nikau’s house at 126 Tasman Park in Auckland and distributed from there too. The smartwatches will be sold on digital platforms at first and later on international online market stores to enable the company to reaches global users. Quentech’s sales and marketing team will comprise Techira Nikau and two freelancing sales agents. Processing of orders will be done via communiqué between Quentin Zamora in Auckland and Techira Nikau in Christchurch.

Our Product

At first, Quentech is providing two power-efficient smartwatches that blend modern glamour with the next evolution of wearable technology to help users to stay motivated, active, and connected. Quentech smartwatch is powered by Wear O.S. and fitted with modern features such as Google Assistant, GPS functionality, NFC payment methods, and swim-proof technology.

The company is releasing its first products in the market, Platinum and Xenon smartwatch for both men and women, respectively. These easy-to-wear, gender-based smartwatches target people in the middle, high-income brackets, fitness and health enthusiasts, and women in the 26 – 60 age bracket. Quentech smartwatches have biosensors that have the potential to be useful in a variety of healthcare applications. Currently, the smartwatch tracks existing customers and provide them health-information on how to improve or maintain good health. Through artificial intelligence, the smartwatch can monitor people’s blood glucose, body temperature, blood pressure, heart rate, and lipids.

The company exploits the multi-function ability of the smartwatch which is employed by setting different modes of uses, for example, the smartwatch measures the heartbeat every 10 minutes concurrently, body temperature every 12 hours, and level of blood glucose in every 8 hours. During its use, the smartwatch’s system records the required data, stores it, and sync to the cloud. In this way, users can know their physical condition anytime and anywhere, and no longer need to see a doctor. Besides, doctors can make medical recommendations to patients based on the data collected by the Quentech smartwatch (Lemoyne, Mastroianni, Whiting, & Tomycz, 2018).

Quentech smartwatches are unobtrusive thanks to their electronic design, established from project Open-Source hardware. This design eliminates most of the fixed costs, which are non-recurring engineering, maximizes system-wide efficiency, and reduces the cost of operations through the community support model. The smartwatch design features a black crocodile engraved silicone strap, full-round display, and pave crystal top ring. Also, our software and hardware solutions will be available under GPL and CERN licenses, respectively. Presently, the product’s specifications are complete while testing the product’s prototypes. Afterward, the assembling sub-contractors will sign the agreement of non-disclosure. The company will employ a market-penetration strategy, in the beginning, to undercut our foremost rivals by selling at $120, 12% below the market price. Afterward, prices will be attuned to compete directly with the other leading players.

Management and Personnel

Quentech Limited has a fresh and energetic management group consisting of five personnel with a shared experience of around 12 years from the sectors of mechanical engineering, ICT, and ITES/IT. The company divides and defines its areas of operation by both functionality and location. Quentin Zamora and Henry Young run the company’s factory in Auckland, New Zealand. The divisions of finance and administration plus sales and marketing, are both located in Christchurch and are run by Techira Nikau, Anne Presley, and Leila Kamande.

Quentin Zamora: Co-creator, CEO, and Head of Production. Zamora has spent over seven years in high-technology firms working with integrated circuit design, from startup to international companies, and has managed four successful, profitable goods in communication and consumer electronic spheres. Previously, Zamora was a mixed-signal and analog design Engineer at ital. N.Z. He likewise co-founded Orca systems and led the team that converted the digital system to an analog system. Besides, she worked as a high-ranking Engineer at Samsung Inc. and Mindtree, where she provided research and development services for artificial intelligence. She has a Master’s degree in Technology and B.E. in Electronics and Telecommunication.

Techira Nikau: Co-creator, Vice-President of Quentech and Head of Sales and Marketing. Techira has a work experience of four years in the Information and Technology sector. He is the chief developer of the novel products at Quentech and brings innovative approaches and ideas Quentech product portfolio’s enlargement. Before, he worked at UST Global, India, as a software developer. He played a significant part in the healthcare vertical analyzing, creating, programming, and testing necessities in COBOL language for various Fortune 500 customers. He has a Master’s degree in Information and Communication Technology from Massachusetts and a B.E. degree in Electronics and communication engineering.

Anne Presley: Manager Sales and Marketing division in Christchurch. Previously she worked for two years as a sales agent for Alliance Françoise health facility in Wellington, New Zealand. She has a B.A. Degree in Information Technology from Emor University and MBA from UCLA.

Henry Young: Head of Operations. Henry is experienced with finances, management, and communication, having worked with Vodafone and Safaricom Companies in East Africa. His skills enable him to manage the business production unit, maintain a productive work environment, and report directly to the CEO.

Leila Kamande: Community Management Leader. Leila is the customer service provider and hence responds to customer’s needs on social media. Leila has worked in a communication firm as resident voice customer care, thereby gathering the required experience to help the company better comprehend customer needs and preferences.

Market, Competition, and Marketing

Market

The smartwatch market in New Zealand is on the rise as more people are finding it more convenient than smartphones. Additionally, there is a new market, which is arising from the need for the healthcare organization to incorporate the multi-function smartwatch in tracking their patients’ health. Accordingly, the current market requires extra supply to meet the rising demand. Soon, Quentech will endeavor to reach the breakeven point and concurrently increase its market share by 25 % and sales by 16%. In the long term, Quentech plans to realize no less than 30% Return on Investment per annum for its investors and launch another factory in Palmerstone North in the fourth year that will ensure it supplies the entire globe.

Quentech’s market segments incorporates five leading target markets: sports, medical applications, health and wellness monitoring, personal assistance, and general use. The split reflects the variations in marketing strategy, which will be employed to aim at every distinct market. The primary market would be the “influencers” who cherish to purchase gadgets ahead of everyone and provide reviews. The secondary market follows whatever influencers say or do, specifically, they follow trends and purchase products that influencers have positively reviewed. The third market would be older adults that simply want to track their health. Lastly, healthcare providers would be looking to prevent treatable diseases without admitting patients in their facilities.

Competition

Quentech’s main competitors are i-watch, Fitbit smartwatch, Samsung galaxy fit watch and Mi-watch. These companies have substantial brand equity, however, there is enough space in the smartwatch market for a startup business since loyalty to a brand is not high on potential customer’s motives for buying (Tapia, 2018). Furthermore, Quentech smartwatch is more professional, has built up artificial intelligence, and collaborates with medical facilities to offer solutions to healthcare-related problems.

Quentech is not only providing men’s smartwatch Platinum, and women’s smartwatch Xenon, but also a website portal for the target users that adds value by offering a software and hardware ecosystem to the users. By offering these high-quality goods and personalized after-sales services, Quentech will undoubtedly meet the customers’ expectations, thereby boosting its image. Even though the products are open source hence open to copy, the immaterial nature of after-sales service will give Quentech a competitive advantage over competitors.

Marketing

Quentech has spent its initial investment fund to acquire relevant raw materials, therefore, it would be challenging to pay for advertisement. As such, the company would like to apply digital marketing strategies:

  • Social Media – Quentech will announce itself through various platforms, including Twitter, Facebook, and Instagram, where it will reach diverse customers.
  • Online Smart Watch Representatives – They will enable Quentech gain a reasonable space in the market to inform prospective buyers of our product.
  • Website – Quentech will employ virtual reality technology in creating a virtual website, which uses 360 video technology to display the smartwatches functions. Through this platform, users will see the specs and features of the requested smartwatch. Additionally, Quentech intends to form a customer service panel to connect with prospective customers directly.
  • Search Engine – The company intends to film a descriptive video and post online telling a story about Platinum and Xenon, its novel features, and its benefits in the healthcare sector.

Research and Development

The success of Quentech heavily relies on its investment in research and development. The company needs to prioritize innovation as well as invention. Consequently, Quentech budget for research and development is as follows:

Table 1: Cost of Research and Development

1stYear 2ndYear
Software Engineers $30,000 $35,000
Hardware $20,000 $25,000
Miscellaneous Budget $15,000 $15,000

The budget for software engineers incorporates funds required for adaptation of new technology and maintenance of the invented functions. Also, the hardware’s allocation maintains and repairs the factory, labor, and direct raw materials. On the other hand, the different budgets act as additional research and development budgets that will be used by staff when attending research forums, upscaling the market, and implementing research information. The company intends to borrow funds required for the research and development from an investment bank and seek the remaining from the investors.

At Quentech, we plan on introducing two products every financial year. There are six phases of action in the company’s timeline; the first three phases comprise prototype development and testing, creation of the ultimate product, and receiving pre-orders for the smartwatches. The last three phases are for shipping and continuous development of the new product. When launching a new product, a similar practice continues. Based on the feedback from customers during the marketing and online communique, the company makes improvements in technology. Quentech’s first two products are present in the phase of prototype testing, with three more prototypes and two more procedures of testing remaining products before being availed in the market.

Financial Information

Start-up Cost

The company needs at least $800,000 for start-up and running of the business. The funds will meet the legal expenses associated with starting a business, rent utilities, insurance, and other relevant expenses, as indicated in the table. As a start-up company, Quentech Limited has inadequate capital, however, to bridge the financial gap funding from grants and long-term loans will be considered. The following table is a breakdown of capital expenses.

Table 2: Capital Expenses

Registration of company $225
Legal expense $345
Marketing $7,000
Annual Insurance $12,000
Direct Material $15,885
Utility Deposit $12,000
Equipment and Inventory $24,200
Fixtures $70,050
Annual Rent $120,000
Artificial Intelligence Technology $525,805
Total Start-up Expense $787,510

Table 3: Balance Sheet Of Quentech Limited As At 16th May 2020

Current Assets
Cash on opening date $1,000,000
Other current assets $0.00
Total current assets $1,000,000
Non-current assets
Artificial Intelligence Technology $525,805
Total non-current assets $525,805
Total assets $1,525,805
Owners’ equity
Quentin Zamora (founder) $35,555
Techira Nikau (co-founder) $29,445
Retained earnings $0.00
Total owner’s equity $65,000
Liabilities
Accounts payable
$0.00
Current borrowing $1,000,000
Other current liabilities $0.00
Current liabilities $1,000,000
Non-current liabilities $0.00
Total liabilities $50,000
Loss at startup ($787510)
Total capital $855,550
Total capital and liabilities $1,405,150
Total funding $1,855,550

Table 4: Sales forecast for the first year

Months Phantom Sales Xenon sales
May $0.00 $0.00
June $0.00 $0.00
July $17,000.00 $20,000.0
August $18,000.00 $30,000.0
September $45,000.00 $40,000.0
October $50,000.00 $50,000.0
November $55,000.00 $60,000. 0
December $60,000.00 $70,000.0
January $65,000.00 $80,000.0
February $70,000.00 $90,000.00
March $80,000,00 $100,000.0
April $85,000.00 $105,000.00
Subtotal $655,000 $645,000
Total Sales 1,300,000.00

Table 5: Projected Cash Flow for the First 3 Years

1stYear 2ndYear 3rdYear
Sales $4,434,200 $4,404,000 $5,343,335
Cost Of Goods Sold $582,445 $150,150 $150,150
Gross Profit $1,895,250 $2,525,000 $3,960,567
Burn Rate $800,000 $800,000 $800,000
Capex $650,500
Cash Flow $2,450,730 $3,845,765 $4,200,150

Table 6: Burn Rate (Per Month)

Salaries and allowances $190,855
Rent $5,245
Utilities $7,150
Insurance $ 750
Total $209,000
Break-even analysis
Figure 1- Break-even analysis

Quentech intends to launch a novel product after every six months. The company projects that the leading smartwatch will breakeven at 605 units. In line with fiscal forecast, the break-even fluctuates a bit due to the cost incurred in designing novel products and salaries of added personnel to be hired. The initial cost to be incurred by the company is on salaries, consequently, the variable cost only accounts for 28 percent of total sales. Thus, the set-up will need monthly sales to be no less than $6,250 to realize the point of break-even by the end of the first year.

Critical Success Factors

So far, the company has proved to be inventive. Otherwise, innovation is the company’s key factor of success since it has the capability of positively changing the smartwatch market and developing it to even higher levels. The use of artificial intelligence by Quentech is likewise the first one in the smartwatch industry, making the company a leading innovator and inventor amongst competitors. Also, Quentech’s competitive price that is 10% beneath the market price, would attract prospective customers to purchase the products on a trial basis. The company provides two-way communiqué and conversation with its customers through online and A.I. discussion panels.

Table 7: Timetable

Business Schedules
1stMonth Create and develop the business idea
2ndMonth Carry out market and consumer research
3rdMonth Write and approach investors with the business plan
4thMonth
First Milestone
Secure the investment funds
5thMonth Locate the premises of the company
6thMonth Register and run the company
7thMonth Design the product and develop it
8thMoth
Second Milestone
Register the product and patent it
9thMonth Carry out a market test
10thMonth Launch the product and advertise
11thMonth Secure not less than ten customers
12th Month
Third Milestone
Realize the break-even point

Risks and Mitigation

The company is facing several risks, including the market risk, which the company plans to mitigate by launching two products every year. Since technology changes rapidly and with technological changes come customer changes, the business will add more features than the previous one to maintain a competitive advantage and keep pace. Secondly, failure to achieve the desired order may be a risk too. A case where the company fails to meet the pre-ordered target may arise. In this case, the business will have analyzed the customer’s feedback and understand the cause before re-designing the product as required by the users. Lastly, the risk of bad debt may arise. However, since the company is selling its products online, all its customers must pay before picking the products. As such, the business mitigates the risks linked with bad debts.

References

  1. Jackson, W. (2019). SmartWatch design fundamentals: WatchFace design for Samsung Galaxy SmartWatches. Berkeley, CA: A Press
  2. Lemoyne, R., Mastroianni, T. Whiting, D., & Tomycz, N. (2018). Wearable and wireless systems for healthcare I: Gait and automatic response quantification. Singapore: Springer.
  3. Tapia, B. (2018). Health professionals’ perceptions of the use of smartwatch technology in their work. Houston, TX: University of Houston.
  4. Tong, R. (2018). Wearable technology in medicine and health care. London; San Diego, Elsevier Science.

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