Lowell Bennett - Writer, Editor, Photographer in China / San Francisco

Assignment: Rapid production of elementary, start-up business plan.
Results: One element in a package with news releases and marketing materials, this provided fundamental positioning for drawing investors. [This is an older portfolio piece. For information on status of venture, Contact writer.]

Automated Payment Systems, Inc.
[Other Header Info Omitted - Web format varies from hard copy.]

Contents:

1. 0 Executive Summary

1. 1 Objectives

1. 2 Mission

1. 3 Keys to Success

2. 0 Company Summary

2. 1 Company Ownership

2. 2 Startup Summary

2. 3 Market Needs

2. 4 Company Locations and Facilities

3. 0 Summary of Products and Services

3. 1 Product and Service Description

3. 2 Competitive Comparison

3. 3 Sales Literature

3. 4 Sourcing

3. 5 Technology and DBA Protection

3. 6 Future Products and Services

4. 0 Market Analysis Summary

4. 1 Market Segmentation

4. 2 Industry Analysis

4. 2. 1 Check Drafting: Industry Participants

4. 2. 2 Distribution Patterns

4. 2. 3 Competition and Buying Patterns

4. 2. 4 Main Competitors

5. 0 Strategy and Implementation Summary

5. 1 Marketing Strategy

5. 1. 1 Target Markets and Market Segments

5. 1. 2 Pricing Strategy

5. 1. 3 Promotion Strategy

5. 1. 4 Distribution Strategy

5. 2 Sales Strategy

5. 3 Primary Strategic Alliances

5. 4 Service and Support

6. 0 Corporate Management Summary

6. 1 Organizational Structure

6. 2 Core Management Team

7. 0 Expansion Plan

7. 1 Important Assumptions

7. 2 Break-even Analysis

7. 3 Projected Cash Flow

Appendix



1. 0 Executive Summary

Automated Payment Systems (APS) is the first nationally franchised company to market a range of software-based payment systems bundled with the technology of electronic commerce. Packaged under the trademarked name, U.S. Checkbyte, products include expedited cash flow systems for business, expedited bill paying for consumers, Internet exchange services and other interactive electronic commercial processes.

In the national and international marketplace, these are still emerging processes, but the fundamental technology is proven and realizing increasing levels of acceptance among a vast market – businesses seeking to maximize cash-flow and the convenience-minded consumer.

Dramatic shifts in jurisdictional posture, on the part of agencies such as the Federal Trade Commission and the National Clearing House Association, have opened the door wide for the application of the monetary processes upon which APS and U.S. Checkbyte is based.

At the date of this writing, the core technology of APS includes:

Electronic Funds Transfer

Check Truncation

Electronic NSF Check Recovery

Check Drafting

Check Verification/Guarantee

Electronic Tax Payments for Business

Interactive Voice Response Customer Service/Payment Systems (in development)

Internet Electronic Payment Exchange (in development)

Merchant Card Services

Consumer Bill Payment Services

(See section 3.1 and Appendix for product and service description)

APS holds proprietary rights to bill-paying software and maintains cooperative agreements with transaction facilitators and governing institutions. The St. Petersburg, Florida headquarters houses the staff and technology to produce, market and support these systems.

APS has obtained franchise registration with the Federal Trade Commission and 34 state governments, including California and Texas. End-user products are marketed both at the corporate and franchise level.

Projected primary growth factors:

Single-unit and regional franchise expansion;

Product marketing;

Expansion of residual (per-transaction/per-payment) revenues;

Conservative capital control and cash flow planning;

Research and development;

Conservative, competitive expansion of product line and systems;

Product packaging.

APS, in operation for two years, has concluded its primary R&D and entered a phase of expanded marketing

(See appendix for specific breakdown of income projections)

This business plan will be revised quarterly.

1. 1 Objectives

Capitalize on early national presence, preempt competition, accelerate market coverage and name recognition.

Expand through single unit home-based franchises and Regional Developer (RD) commercial locations.

Provide franchisee and product end-users with total, on-call technical support via phone and Internet.

Leverage current product line to attract new software developers and relevant new technology.

Refine product "Launch Network" for franchisees to execute ever more rapid distribution of new products.

Continue conservative control of expenditures and limit input of equity.

1. 2 Mission

Nationally and internationally, APS will deliver to business and the consumer automated systems of paying and receiving, as well as the ability to capitalize on the burgeoning venue of electronic commerce.

The company will continue to accelerate the R&D programs required to remain at the forefront of a still emerging, expanding industry.

1. 3 Keys to Success

Marketing: Bundle a comprehensive, progressive package of business services providing expanded and expedited income streams for virtually any business.

Value: Maintain low set-up cost for the end-user client so as to expand base of residual per-transaction, per-payment (fee-based) income.

Product Security: Insure all phases of development are protected through copyrights, trademarks and patents.

Management: Deliver products on time, provide on-demand tech support and manage budgets properly.

Growth: Execute a steady, well-planned national expansion.

2. 0 Company Summary

APS is currently expanding a franchised network to market and fully support a comprehensive range of expedited payment technology, electronic commerce and collateral consumer/commercial services.

(See Section 3.1 for product and service descriptions)

2. 1 Company Ownership

At present, APS is a privately held Florida Corporation. 100% of the preferred stock is owned by Carn & Associates. 64% of the common stock is owned by Roy J. Geilen, CEO. 10% is owned by Clifford J. Hunt and John Keifner with the remaining 25% being treasury stock.

2. 2 Startup Summary

Incurred start-up costs was approximately $200,000. These funds went primarily to R&D, legal costs, acquisition of stock and other expenses associated with the opening of the St. Petersburg, Florida headquarters.

The start-up costs were financed by direct owner investment.

2. 3 Market Needs

APS was founded in answer to the age-old concern of business – the ebb and tide of cash-flow. Typical conditions and scenarios:

There are millions of small, medium and large size businesses which could be more profitable.

Many of these businesses are paid primarily by check, credit card or time payments.

Many businesses have sizeable collection costs and losses.

Many businesses have an inconsistent cash flow due to variable payment by customers.

2. 4 Company Locations and Facilities

Corporate offices, research/development and tech service departments are housed at 146 2nd St. North, St. Petersburg, Florida 33701.

Ancillary support and services are outsourced to established providers nationally.

3. 0 Summary of Products and Services

APS distributes proprietary software and support services for various systems of automated

payments and electronic commerce.

Company focus is on the sale of software, bureau services and the expansion of franchise operations. Corporate maintains established major service accounts, but the primary goal is franchise success and ever-increasing residual income for both the company and franchisee.

3. 1 Product and Service Description

Check Drafting: Pre-authorized, automated MICR encoded check issuance for consumers and business. Check Truncation: The instant conversion of a paper check to an electronic transaction at the point of sale.

Check Verification: Collateral to truncation, verifies account history.

Check Recovery: Electronic re-presentment and recovery of NSF returns.

Electronic Funds: Transfer Paperless, electronic account debiting and crediting routed through the Federal Reserve.

Merchant Card Services: Visa, Mastercard, American Express and Discover.

Consumer Bill Payment: Third party payment of bills by EFT or check draft.

Electronic Tax Filing/Payments: Support service for businesses complying with new IRS electronic filing regs.

Interactive Voice Response System: No-hold time telephone bill paying, purchasing and account inquiry.

Electronic Payment Exchange: Online Internet purchasing, bill paying, account inquiry service.

(See appendix for detailed breakdown of products and market applications.)

3. 2 Competitive Comparison

There are some local and regional providers focusing primarily on pre-authorized bank drafting (paper check). However, currently there are no other national companies delivering the range of services and technology bundled by APS. Therefore, competition is mainly the existing, obsolete payment-by-mail processes.

According to the Small Business Administration, the average cost of processing an invoice, including printing, postage and handling, ranges from $3.16 to more than $10.00. APS provides systems and services which will deliver that payment for a fraction of that cost – automatically and on-time.

Market penetration will increase as businesses become aware of an established, national provider of expedited receivables and electronic commerce.

3. 3 Sales Literature

(Copies of APS literature and resource material is attached in the appendix.)

3. 4 Sourcing

APS assembles its software in-house and out-sources for ancillary materials and services. The cost to produce each paper check is $.015 and the cost to produce each software package is less than $40.00.

Manuals and document originals are produced on IBM PC compatibles and HP LaserJet printers. Some small-scale promotional products are printed and assembled in house to minimize cost and control production. Computer disks are purchased through a regional distributor. The "credit meter," the device which records check draft issuance, is purchased from an outside vender at $39.00 per unit.

Exclusive relationships are in place with established financial institutions and providers.

For other electronic services, the company incurs no costs in advance. All fees, and incomes, are based on residual, per-transaction schedules.

3. 5 Technology and DBA Protection

All APS software is protected by patents and copyrights. The names, U.S.Checkbyte, Universal Security and Powerpay Financial Services are trademarked.

3. 6 Future Products and Services

The systems and technology upon which APS is founded is proven, simple to use and easily updated.

The home-based check drafting service is based on the "credit meter." This device records and debits for each check printed. It is recharged subsequent a single phone call or e-mail to corporate tech services and issuance of encrypted digital codes.

Though the software could be reinstalled and replicated, the software is useless without a charged credit meter.

The Interactive Voice Mail Customer Service systems, Check Truncation and other electronic APS products are highly reliable and secure for bill paying by various non-cash sources.

The use of electronic transfer technology for tax payments is encouraged, and in some cases required by, state and federal governments. Effective by 1999, the majority of businesses will be required to remit tax payments electronically by both state and federal agencies.

APS is currently evaluating other electronic, online and interactive commercial technology which may enhance the product line.

4. 0 Market Analysis Summary

The market-driven premise behind the growth of APS is simple: businesses can count on getting their receivables on time with no handling process; the consumer's bills are paid automatically, on time with no check writing, no addressing envelopes, no paying for postage.

APS payment alternatives (for instance, the ability to pay with a check-by-phone and electronic check) has potential application for a vast segment of our society – those consumers who do not have, or are reluctant to use, credit cards. These services can expand a business’s volume, accelerate cash flow and eliminate mail-order turn-around time.

There exists so vast a market for these services that no single company could monopolize the industry.

Nationally, APS has no competitors offering the same range of services and technology.

4. 1 Market Segmentation

The segmentation of the market comes through individual sales and franchise opportunities. Client buying decisions are not major and usually can be made by the accountant or accounting department. The collections department, if separate, is a likely customer.

Franchise businesses may also offer retail software sales and check drafting. Acting as an agent of APS, the franchisee can market these systems individually and will be paid a commission for each sale.

Flexibility and the variety of products and services allow for franchisee niche market specialization and overall diversification.

4. 2 Industry Analysis

The potential market for automated, electronic payment and purchasing is remarkable not only for the vast number of potential new customers, but also for the lack of national competitors.

Many large institutions are phasing in electronic monthly payments, and there is some Internet commerce. However, literally hundreds of thousands of businesses remain subject to the sometimes fatal inconsistencies of the check-by-mail payment.

Also, there is astonishingly small use made of the viable systems of check-by-phone and check truncation, the conversion of a paper check to electronic funds transfer.

Of the more novel systems offered by APS, check drafting is the only arena with notable competition – and that appears fragmented.

The check drafting industry is generally divided into two segments; software providers and service providers.

There are two major companies enabling on-site printing, but their pricing is prohibitive and their competitiveness substantially inhibited.

Western Union's program, "Phone Pay," is a very small portion of their overall business. It is only marginally profitable even at their current pricing structure, which is the highest in the industry.

Accelerated Payment Systems, a division of National Credit Management Corp., has filed a patent infringement suit against Western Union. Accelerated Payment Systems is restructuring its pricing to be much more aggressive in the opinion that Western Union will be unable to follow. This would leave APS a primary provider in the collection industry in which both companies specialize.

No current competitors are in place nationally or leveraging franchising as a method of growth. Therefore, they lack national presence, diversity and a "safety in numbers" business base.

4. 2. 1 Check Drafting: Industry Participants

Paper drafts increased in popularity after a rule change by the National Automated Clearing House Association (NACHA) in April of 1993. Prior to that date, NACHA required anyone effecting a single entry purchase by check to have signed authorization. MICR encoded pre-authorized paper drafts have no signature requirements, so their use increased dramatically.

While it is difficult to know how many companies are in existence, most of the larger are members of the National Automated Payment Association. (That membership list is attached.) The NAPA members probably account for fifty to sixty percent of the paper drafts printed for third party companies. Some larger companies do print for their own clients, those would be difficult to identify and inconsequential to the APS market.

4. 2. 2 Distribution Patterns

Distribution channels for software and other services are quickly created by franchising. (The U.S. market can be expected to absorb twelve franchises per month for the first year and sixteen additional franchises per month for the next five years.)

The APS software and subsequent updates are stored and transferred via 3.5" floppy diskette.

Other electronic systems and transactions transmit through modem and established national and international networks.

4. 2. 3 Competition and Buying Patterns

Most competitors offer the sale of a software product or the outsourcing of the work on a service bureau basis. This forces the client to adapt to that particular vendor's method of doing business and provides limited options and flexibility.

APS offers both options. The client company can begin by outsourcing to APS corporate and later be transferred to an area franchisee. The client company itself may elect to bring the transaction process in-house.

This flexibility gives APS a distinct advantage over the few localized competitors now in place.

4. 2. 4 Main Competitors

There are currently no competitors of national scope offering the APS range of systems and services.

5. 0 Strategy and Implementation Summary

Backed by the technical and marketing support of corporate, and under the immediate direction of a regional developer, franchisees will market and distribute to their respective area.

APS marketing is intended to boost awareness and make the business and consumer client more comfortable with automated and electronic payments.

The approach is simple and practical. For the business, payments arrive on-time, automatically without the "check is in the mail" scenario – and the process is less costly than manual handling of receivables.

For the consumer, their bills are paid effortlessly, securely and on time – a benefit to their personal schedules, reputation and credit rating.

Other technology and services, point of sale electronic checks and Internet bill paying, for instance, will be offered collaterally to the business and consumer.

5. 1 Marketing Strategy

Introductory direct marketing efforts will focus on businesses dependent on, and subject to, payment by mail. A small sampling of this enormous potential market would include:

*Private Schools *Computer Rental Centers *Churches *Dance Studios *Bottled Water Companies *Doctors and Dentists *Fitness Centers *Carpet Cleaning Companies *Cable Television Companies *Office Cleaning Companies *Automotive Parts Outlets *Home Maid Companies *Apartment Complexes *Security Companies *Property Management Firms *Pool Service Companies *Country Clubs *Lawn and Garden Services *Garages *Insurance Companies *Paging Companies *Independent Phone Companies *Member Associations *Health Clubs *Newspapers *Yacht Marinas *Magazine Publishers *Child Care Centers *Flying Clubs *Public Broadcasting Stations *Time Share Groups *Answering Services *Alumni Associations *Furniture and Appliance Rentals *Voice Mail Centers *Medical Equipment Rentals *Karate Schools *Pest Control Services *Tanning Salons *Finance Companies *Utility Companies *Storage Centers.

In establishing APS accounts, an easy transition can be made to marketing systems of electronic commerce, customer service and merchant card services.

5. 1. 1 Target Markets and Market Segments

The ideal client is the business with 50 or more monthly receivables. At that level, APS provides a cost effective, highly-efficient alternative to the manual collection of receivables.

Merchant cards, electronic funds transfer and IVR systems are optimal add-ons for most businesses. Check by phone software provides an alternative method of payment for phone sales and reorders. Check truncation (or electronic checks) allows the retailer faster access to funds, security from theft and a less costly alternative for NSF check recovery.

5. 1. 2 Pricing Strategy

The start-up cost for new franchisees is relatively low, $8,500. A full Financial Services franchise is $14,850. The Regional Developer franchise, a protected territory, starts at $25,000, a cost based on the number of businesses ($.50 per) in that area.

All start-up fees include airfare, hotel, training is Tampa Bay, software, manuals, on-call tech services and on-going marketing support.

The fundamental goal of APS is to establish viable franchises and expanding accounts. The franchisee and corporate derive long-term residual income from each transaction and every payment.

(The full breakdown of franchise inclusions and product costs are attached.)

5. 1. 3 Promotion Strategy

Promotional strategies currently under implementation include:

Direct mailings to business at the franchise level;

Internet press releases;

Off-line (hard copy) press releases;

Website search engine promotion;

Infomercials;

Magazine ads;

Newspaper ads;

Radio commercials;

Point of sale consumer awareness materials.

Corporate marketing personnel are available to franchisees on a priority basis and will collaborate with the franchisee on individual basis.

5. 1. 4 Distribution Strategy

Distribution of product to business (software, blank check stock, printed drafts) will be carried out by the local franchisee.

Distribution from APS corporate will be assigned to major parcel carriers, such as UPS.

5. 2 Sales Strategy

Sales and the building of a client base will occur at the franchise level under direction of the Regional Developer with the substantial support and monitoring of corporate.

Franchisees are screened for financial stability as well as the ability to market and communicate.

The franchise contract specifies, and requires, reasonable standards of performance.

5. 3 Primary Strategic Alliances

First National Bank of Tampa, FL – facilitator of electronic funds transfers;

Equifax – electronic check verification/guarantee, credit reporting;

AT&T – Website and Internet services;

Investor Hotline of Clearwater, FL – promotion of stock and franchise marketing;

Automated Transaction Services – EFT facilitator for high-risk business.

Electronic Card Services – point of sale non-swipe credit card services.

Merchant Credit Services – point of sale and non-swipe credit card services.

APS is a member of the National Automated Clearing House Association (NACHA) and the National Automated Payment Association (NAPA).

(Roy Geilen, CEO of APS, was elected to the Board of Directors of NAPA in March, 1997.)

5. 4 Service and Support

APS is committed to providing the highest level of technical support to our franchisees and the end user, the client.

Smooth running purchasing and payment systems are the lifeblood of that end user, the franchisee and APS corporate.

There will be no, or little, down time. When a problem occurs, it will be diagnosed and corrected – permanently.

6. 0 Corporate Management Summary

Current 12-month recruitment plan:

CEO – in place;

President – in place;

EVP/Operations – in place;

VP Marketing/PR – in place;

CFO – 4th quarter/97;

VP Franchise Sales – 4th quarter/97;

National Franchise Trainer – 1st quarter/98;

MIS Director – 4th quarter/97;

Tech Support Director – in place;

Customer Service Director/Sales – 1st quarter/98;

Corporate Sales Director – 2nd quarter/98;

Corporate Office Manager – in place.

6. 1 Organizational Structure

APS Corporate is organized into three main functional areas: sales and marketing, product development, and operations. Production is coordinated collaterally with sales and marketing.

Franchises operations route through the Regional Director to Corporate.

6. 2 Core Management Team

President and CEO: Roy J. Geilen

Mr. Geilen is responsible for the business development and marketing function of the company. Prior to joining U.S. Checkbyte, Mr. Geilen was President and Founder of American Business Leasing, Inc., an equipment leasing company, from 1983 until its sale in 1991. In 1984, Mr. Geilen founded American Executive Suites, Inc. Serving as its President through 1992, Mr. Geilen grew the company to $4.5 million in annual revenues and 15 locations throughout Florida. From 1986 through 1990, Mr. Geilen was a member of TEC (The Executive Committee), a nationally recognized association for CEOs. He currently sits on the Board of Directors for the National Automated Payment Association. Mr. Geilen attended the University of South Florida as a marketing major. He served nine years in the United States Army including a tour of duty in Vietnam.

Vice President, Sales and Marketing: Roger K. Humbert

Mr. Humbert joined Automated Payment Systems, Inc. as its Vice President of Sales and Marketing at its inception in March of 1996. His previous experience includes 15 years in the real estate business initially as an agent, and eventually as a broker/owner of an ERA franchise. Mr. Humbert also owned and operated a successful sales and training franchise where his clients included builders, contractors, and Realtors. For ten years prior to joining Automated Payment Systems, Mr. Humbert served in the mortgage services and origination business as a loan officer and manager. A graduate of St. John's University of Collegeville, MN, his B.A. included majors in psychology and science. Mr. Humbert is also a certified social worker and teacher.

[Other bios omitted in this portfolio version.]

7. 0 Expansion Plan

Franchise expansion will be effected by regional advertising and in-person consultations.

Case Example:

A recent two-weekend ad run in the New Orleans' newspaper garnered limited but high-quality candidates. This is attributed to the "screening" nature of the ads, in that the copy specified a base franchise would carry a start-up cost of $8,500, and the franchisee would have to possess, and be at least marginally adept in the use of, a PC.

At the time of this writing, it is expected a Regional Developer (RD) and no fewer than three single-unit franchisees will be appointed in the New Orleans market.

Planned efforts will refocus on the Gulf Coast market in collaboration with the area RD.

Scheduled Franchise Marketing:

Subsequent regional efforts will include: Dallas and Houston, Texas in the fourth quarter, 1997. The New Mexico, Los Angles and San Francisco markets will be targeted for late-fourth quarter, 1997, and first quarter, 1998.

National franchise trade shows have provided the greatest thrust to date for general promotion and franchise sales.

National print ads are currently slated for runs in USA today and Entrepreneur magazine

The APS/U.S.Checkbyte Web site (www.uscheck.com) has proved highly useful as a marketing learning tool for prospective new franchisees. Interactive links take a visitor on a "tour" of products, services and franchise plans. Hyper links send a visitor to "resource" sites, including NACHA, NAPA, the Federal Trade Commission and other relevant, credible sources.

(See appendix for a summary of projected revenue from franchise and product sales.)

7. 1 Important Assumptions

The financial plan depends on important assumptions. The key underlying assumptions are:

1) The United States realizes a growth economy, without major recession.

2) There are no unforeseen changes in technology and banking to make our software immediately obsolete.

7. 2 Break-even Analysis

The break-even analysis shows that APS has a good balance of fixed costs and sufficient sales strength to remain healthy. The break-even point is close to five franchise sales per month, while our sales forecast for 1998 calls for an average of seven franchise sales per month.

This forecast does not take into consideration existing corporate cash flow, regional developer franchise sales or any other product line such as corporate software sales, EFT sales, electronic tax filings, credit card services or check credit sales.

(The accumulation of existing and future residual per transaction income is not factored into the break-even analysis. )

(See attached appendix for charted projections.)

7. 3 Projected Cash Flow

APS expects to manage cash flow over the next three years in accordance with the attached Cash Analysis (see appendix).

[Appendix not included in portfolio Web version.]

Lowell Bennett Writer, Editorial Consultant, Photographer - China / International Content / Strategies for Publications and Enterprise