Business Plan

 

This Business Plan is confidential and contains proprietary information and intellectual property of Islamic e-Knowledge. Neither this Business Plan nor any of the information contained herein may be reproduced or disclosed under any circumstances without the express written permission of Islamic e-knoweldge. This Business Plan does not constitute an offer to sell or solicitation of an offer to buy securities of Islamic e-Knowledge. Any such offers and sales will be made only to “Accredited Investors,” as defined in Regulation D under the Securities Act of 1933, as amended, pursuant to separate agreements to be negotiated by the parties.

1.0 Executive Summary

 

The following Executive Summary is qualified in its entirety by more detailed information appearing elsewhere in this confidential Business Plan. The entire business plan should be read and fully understood by prospective investors in Islamic e-Knowledge

 

This Business Plan concerns the development of the organization’s Phase 1 till Phase 5 properties that include eBooks, audio books, multiple language books and developing own unqiue content with respect to Islamic history, ideology, vision, teachings etc.  However, any investment in Islamic e-reading will be for nonprofit purposes only as the organization will be using the funds for developing eBooks and other products, the profit of which will be used for further development of the Company rather than paying as profits to investors. The organization  will preferable be established under 501 (c) (3) if we decide to incorporate in the United States but can be established and operated in any other part of the globe as well.

 

We will base our model on social business model in which our aim is to expand our user base to Muslim as well as non-Muslim customers to impact their Islamic knowledge and increase the distribution of books. Our social business model will be based on the theory that all the profits generated from the business will be used for expanding the Islamic knowledge base in the world. Our focus will not only to provide Muslims with the resources of eBooks but rather our focus is to give non-Muslims with Islamic knowledge through latest media.

 

We also aim to involve the Muslim community in USA and elsewhere who are willing to work voluntarily for us in converting existing books into eBooks and then into audio book. Our long term plan is to create a video library as well for all the Islamic eBooks which will further increase our user base in the industry.

 

If we take a look at current Islamic book industry then we can realize that there is no major publishing company that focuses on conversion of Islamic books in eBooks as per the technological demand and advancement. We, on the other hand, want to take this opportunity to fill this gap and to provide the market with a platform where we convert existing books into eBooks, provide similar services to other publishers, creating audible content and later video content to completely fulfill the market needs for availability of digital content. The world has moved towards digital content and everyone has access to information on their palms and this is the high time we should also create something that gives our next generation access to all the Islamic knowledge and eternal blessings to us since it will be a continuous Sadqa.

 

 

1.1 Recent Market Activity

 

When speaking to prospective investors or at various conferences and conventions about introduction of Islamic eBooks and the future of publishing, one of the most common questions we’re asked is: “Do you think today’s youth will read eBooks?”

 

The question is not as complex as it might seem. Given the growth of the eBook industry alone since 2007, the introduction of Amazon’s Kindle,–and later, the Apple iPad and Samsung Galaxy line, which millions of people use for reading digital content—we can make an educated Muslim community which might be worth in the future. This is a social as well as religious cause which will work as eternal blessings for the entire team.

 

The E-Book Publishing industry has grown moderately over the past five years. E-book sales surged on the heels of new mobile device introductions in the early years of the period. E-books have found their place in the hearts of American bookworms – 20 percent of book readers in the U.S. stated they read more e-books than hard copy books, and 23 percent read about the same number of hard copy books and e-books. In 2016, about 73 percent American book consumers stated they read books in any format, and about 30 percent stated reading at least one e-book in the past year. This consumption also has a positive reflection on revenue generation. Between 2013 and 2018, revenue from e-book sales in the U.S. is forecast to nearly double. Daily sales of e-books of online retailer Amazon in the U.S. alone stood at more than 517.5 thousand units as of January 2016, with e-books published by independent publishers accounting for the largest share of this total. Popular e-readers among U.S. publishers and authors include Amazon’s Kindle, Apple’s iPad, Barnes & Noble’s Nook, and Kobo, an e-reader produced by Canadian company Kobo Inc.

 

The e-book industry is here to stay, showing healthy projections. By 2018, e-book sales are forecast to account for about a quarter of global book sales. Consumer e-books alone are projected to generate nearly 20 billion U.S. dollars in revenue by 2018.

 

 

 

1.2     Mission and Goals

 

(a)       Mission

 

Islamic e-Knowledge will be a global, multi-brand venture that will provide digital books and other media products as well as publishing services designed to educate, impart knowledge and connect our customers worldwide.  Inspired by the wonder, power, and critical importance of reading and digital media, we are dedicated to supporting Islamic education and literacy programs through our Read and Change the World slogan. Islamic e-Knowledge will deliver value reading resources which will impact the lives of our customers, our employees, and our stakeholders, while at the same time leveraging our unique business model to help change the world for the better.

 

(b)       Goals

 

To utilize a social-responsibility business model to establish the premium brand of Islamic e-Knowledge as market leaders in Islamic eBooks retailing; digital publishing and distribution, institutional sale, and reading-centric merchandise retailing. We aim to help support and expand Islamic literacy and educational programs on a global scale and to provide unique, value-added features through mobile apps that drive high-volume sales along with a consistent stream of new and dynamic reading-related products and services to our customers worldwide. We also aim to support our publishers and expand our operations to achieve our ultimate goal of increasing the Islamic eBooks and other related material.

 

 

 

1.3     Financial Summary

 

Islamic e-Knowledge will incur around $126,000 in losses during the first two years in which it aims to establish itself in the market and raise its customer base along. The organization is expected to generate profits from third year onwards and the management is hopeful that it will be able to generate approximately $1.9 in net contribution in the five years of its operations. The detailed financial projections are included in this business plan.

 

2.0   Business Description

2.1     Who We Are?

 

Islamic e-Knowledge is the company developing integrated Islamic eBook library that will provide a wide variety of reading-related products and services to the B2C and B2B markets.

 

The Company’s goal is to become a high-growth business within five years, beginning operations in Year 1 (2018) with our key retail division eBooks launch on all the major eBook selling platforms like Amazon, Google Books, Barnes and Noble, iBooks etc. mobile app for iOS and Android.

 

Some divisions, such as audio books and multiple language books are complementary to our main product eBooks, and will be developed after the success of our Development Phase 1.  Other divisions will be built-out over future Development Phases to meet the needs of our growing customer base.

 

Over 425 million consumers annually purchased books and reading-related products worldwide in 2014.  Ebook sales alone are growing between 28-30% annually (Digital Book World, January 2014), Islamic e-Knowledge is well-positioned to take advantage of the vibrant multi-billion dollar global book and reading markets.

 

2.2     Revolutionizing Islamic EBook Industry

 

The Islamic books industry is in its infancy stage where no major industry analysis is available neither any publication house that focus on providing Islamic eBooks to the readers. We aim to change this industry with revolutionizing the Islamic eBook industry. We will be working towards publishing major Islamic books into eBooks and marketing them on various social media websites, community gatherings and Islamic events. Our distribution will be performed through Amazon which is our primary distribution channel.

 

In this way we will be using the existing distribution structure to transform the Islamic eBook industry. The Muslim population in the world is more than 1.6 billion individuals without any platform/ publisher exclusively providing Islamic eBooks. Thus, this gives us a first mover advantage in this industry where we will be taking rights from the authors for publishing their eBooks and then selling it on various online platforms.

2.3     Our Revenue Models

 

The Company will base its retail pricing for eBooks on current trends among the leading eBook retailers. Pricing decisions will be determined by undertaking ongoing, independent analysis of products sold in the marketplace and in-house analysis of sales trends on a book-by-book basis.

 

The Company expects the average price of eBooks to fluctuate over the next five years. The trends will most likely scale slightly upward rather than down as the eBook industry stabilizes and moves past the flattening trends of 2013 and 2014. On the assumption side we have kept the selling price as constant for five years i.e.$6.5 per eBook.

 

2.4     Model # 1: eBook Conversion

 

The first major revenue stream of the Company will be the selling of eBooks after conversion from conventional book. eBooks sales are estimated to be around $99,000 in the first year and will eventually increase to $1.18 million by the fifth year.

Description Year 1 Year 2 Year 3 Year 4 Year 5
No of titles to be published 100 125 169 228 308
Cumulative titles 100 225 394 622 929
No of copies to be sold each year 150 210 294 412 576
Total books sold 15,000 47,250 115,763 255,835 535,390
Cost of publishing 1,000 1,000 1,000 1,000 1,000
Sale of eBooks 97,500 307,125 752,456 1,662,928 3,480,035

 

2.5     Model # 2: Audio Books

 

The audio books are the second major revenue stream for the Company which will be started from second year of operations. The eBooks will become a major revenue segment by the end of five years.

 

Description Year 1 Year 2 Year 3 Year 4 Year 5
No of books to be converted 0 50 68 91 123
Cumulative audio books 0 50 118 209 332
No of downloads 0 150 210 294 412
Total downloads 0 7,500 24,675 61,336 136,505
Cost of conversion of each book 0 1,500 1,500 1,500 1,500
Audio books 0 41,250 135,713 337,347 750,775

 

 

2.6     Model # 3: Multiple Language Books

 

We aim to translate the English eBooks to multiple languages which will be the third phase of our business model and thus will bring another revenue stream into operations.

 

 

 

 

Description Year 1 Year 2 Year 3 Year 4 Year 5
No of books to be translated 0 0 50 68 91
Cumulative books 0 0 50 118 209
No of books to be sold 0 0 75 105 147
Total books sold 0 0 3,750 12,338 30,668
Cost of conversion of each book 0 0 1,200 1,200 1,200
Multiple language books 0 0 29,963 98,577 245,036

 

 

 

2.7     Model New Content  

 

Description Year 1 Year 2 Year 3 Year 4 Year 5
No of titles to be published 0 0 0 50 75
Cumulative titles 0 0 0 50 125
No of books to be sold 0 0 0 100 150
Total books sold 0 0 0 5,000 18,750
Cost of development of own content 0 0 0 1,800 1,800
Own Content 0 0 0 32,500 121,875

 

 

 

2.8     Strategic Position and Risk Analysis

 

The objective for I is to be the “Ultimate Destination for Islamic eBooks”, where our customers, partners, and sponsors can help change the world through the power of Islamic knowledge.  By providing a full suite of services to the B2C and B2B, the organization will become a major competitor in the market.  To achieve our goals, we have developed the following strategic Competencies which are as follows:

 

  • Developing highly-attractive and effective ecommerce marketing activities in order to increase awareness about Islamic eBooks
  • Developing efficient, effective ecommerce trading mechanism through listing books on notable websites to attract readers from across the globe
  • Utilizing the latest interactive and responsive desktop and mobile technologies
  • Providing world-class customer service through our comprehensive Customer Care Program
  • Developing a robust board that will be one of the major strengths of the organization as it will include known names in the industry along with taking all the decisions on merit

 

 

 

2.9     Risks

 

Although the number of significant players in the eBook publishing market is relatively small, there remain several potential threats that could affect Islamic e-Knowledge:

 

A top risk to the Company’s success is that we will be under-funded and unable to complete Phases 1 and 2 of our Development Roadmap.  To avoid this, we are using a “master planning” approach to building the Company’s lines of business.  Our marketing dollars can be targeted for maximum ROI because we are beginning with instantly-recognizable brands.  Technology is another area where we are working to avoid the pitfalls of being under-funded.  By developing a controlled and cost-effective B2C ecommerce platform for the Company we are simultaneously creating an infrastructure that can be much more easily adapted to future lines of business.  This is the same approach we are using for our B2B lines of business.

 

There is also a risk that the Company does not understand its market or its customers.  To mitigate this risk, Islamic e-Knowledge need to invest a great deal of time and money in research to discover who its competitors are and what they want in both the B2C and B2B markets of our industry.  This insight has proven invaluable in creating this confidential Business Plan and in developing the Company’s Development Roadmap and Marketing Plan.

 

Further consolidation of online retail (B2C) ecommerce bookstores is another risk.  If a “smarter” company were to merge their culture and values with the infrastructure of a larger competitor such as Barnes & Noble, the effect could be detrimental to the Company’s efforts.

 

Another risk we have considered is that we may fail to gain the traction we need to ensure that our Customer Acquisition Cost (CAC) is not greater than our customer Lifetime Value (LTV).  In order to mitigate this, we have created a flexible, comprehensive marketing plan that will enable us to gain traction even as we develop our key lines of business.  We know that many startup companies fail to focus equally on gaining traffic while building their initial product, and we have taken extraordinary steps to avoid this particular pitfall.

 

A continuing risk is always the health of the domestic and global economies. When there is an economic downtown, this can lead to less discretionary spending by consumers. This, in turn, could lead to less demand in the B2B segment of our business, causing readers and publishers to produce less content for sale in response to the weakened economy. The good news here is that book sales usually increase during economic downturns, because books are a value-added alternative to more expensive media spends such as movies, music, or cable television.

 

We will be working with various Islamic scholars for converting their books into eBook. This will involve conversion of eBooks and publishing it on various platforms. Since we are in this business and our objective is to run it for social cause we will be helping these scholars to publish the books on Amazon and other platforms which will ultimately result in fulfilling of our main cause of imparting Islamic education and knowledge.

 

Although the final risk is relatively minor, it is possible that eBook reading will transition from an app-based to a web-based model.  However, until publishers feel comfortable with not using DRM on their eBooks, this is unlikely to come to pass.  If it happens, the Company will shift its e-reading app development efforts to the new web platform.

 

 

2.10     Marketing

 

The marketing efforts of Islamic e-Knowledge during Year 1 and Year 2 will be directed toward executing the Company’s strategies for building awareness and driving traffic to Islamic eBooks available through various ecommerce platforms.

 

A combination of strong, creative marketing is expected to result in many visitors who will become loyal, repeat customers of our Islamic eBooks.  The Company expects to use a variety of marketing tools including guerilla/grassroots marketing, web advertising, affiliate marketing programs, public relations, and key strategic alliances to drive volumes. The following will provide a more detailed breakdown of the marketing tools the Company will employ:

 

(a)       Email Marketing

Email marketing has been and continues to be, one of the strongest, most cost-effective methods for marketing products and services.  Islamic e-Knowledge will collect opt-in emails through readily-available subscription forms located throughout its websites. The Company will utilize a multi-tiered marketing program that will offer several levels of email newsletters to subscribers; each tier targeted by their sign-preferences and declared interests.  Emails will cover new Islamic eBooks launches, existing portfolio, sales announcements, special event notifications, and other special offers.  Click-through’s for all newsletters will deliver dynamic reporting capabilities used to better focus and streamline all ongoing marketing initiatives.

 

(b)       Search Engine Optimization

The Company will engage in a significant amount of keyword market research that will enable us to provide more accurate access to the products, services, and information our site visitors and customers are searching for.  We will also make use of extensive geolocation technologies to target specific geographic areas, optimizing select products and services most applicable or appealing to those regions.

 

(c)        Search Engine Marketing

The Company will use Google AdWords under a structured budget to deliver high-volume traffic from key demographics tied into our various products and services.  Dividends from this approach will include the ability to gauge interest in specific product and service categories, target demographics and audiences, and serve as a valuable business tool to make additional business decisions.

 

(d)       Targeted Blog

The Company believes that a strong blog presence will be invaluable for communicating with new and existing customers.  This will allow us to share our views on a variety of subjects, from the future of the Company to responding to select topics presented by visitors or new books, existing portfolio, any special request etc.  The blog will be deliberately designed to draw traffic to the site while exposing visitors to the Company’s additional web properties, products, and services.  The blog will be RSS-enabled, and postings will be tied to the Company’s key social networking platforms including Facebook and Twitter.

 

(e)        Consumer Incentives

Islamic e-Knowledge will offer a variety of creative rebates, merchandise bonuses, and other incentive programs designed to drive new customer sales and encourage repeat sales from existing customers.  These promotions will be marketed through our email marketing and other communications and through our online affiliations, strategic partners, public appearances, and additional grass-roots efforts.

 

(f)         Public Relations

Islamic e-Knowledge will implement an ongoing PR campaign designed to build awareness and drive traffic to our Islamic Ebooks during Year 1 and Year 2.  These efforts will focus on availability of eBooks across the world, principally in North America, expanding into other regions following Year 2.

 

(g)       Unconventional PR

Besides conventional public relations strategies, Islamic e-Knowledge will implement several unconventional PR initiatives.  These will range from unique, one-off public events to customer appreciation campaigns and proactive PR “stunts” involving our key competitors virtually guaranteed to achieve nationwide—and perhaps even worldwide—media coverage.

 

(h)       Community Building

The Company will develop and implement a strong community building plan focused on creating an ongoing, visible synergy between the Company’s online and offline events, public relations initiatives, show and convention appearances, and internal marketing. The Islamic community is one of the most vibrant communities across United States and other European region, thus community building and creating awareness of eBooks within community will help us to drive volumes.  The pivot around which all of this community building will take place will be our social network for readers. In later iterations, B2B community building within the professional side of the publishing industry will be instituted through a separate, invitation-only social network.

 

(i)          Social and Display Ads

Islamic e-Knowledge will engage in targeted social media advertising and take out targeted display ads to appeal to the Company’s B2C and B2B markets. Special care will be taken to track performance to maximize ROI in these areas. Our advertisement will also be displayed in Islamic books, events advertisement and universities. We want to create awareness about the Islamic knowledge that we aim to spread across the world.

 

(j)         Social Media

Social media is the fastest way to market any product, service or in our case an eBook. We aim to utilize social media for maximum marketing of our eBooks which will be linked with purchasing options of online platforms primarily Amazon. The online marketing will involve providing a brief intro of the book that will help the readers to evaluate the content and the benefit they can get from purchasing the book.

 

(k)       Marketing through Islamic scholars and famous personalities

We will be using audio services from scholars and famous Muslim personalities in form of short reviews of the book and marketing it on social media, local radio and other mediums which will help us to market the books to a wider audience. The increased customer reach will help the sales to increase and revenues to expand exponentially.

 

(l)          Offline Advertising

The Company will also evaluate the ROI value of very select, targeted offline advertising in both print mediums and public markets.

 

2.11     Key Operational Priorities

 

We have determined that we must prioritize several key operational goals for our business to succeed in both the short and long terms:

 

(a)       Establish and Control CAC:

Customer Acquisition Costs are one area often overlooked by new companies, and we do not intend to make that mistake.  Our goal is to determine, and then to use, the most cost-effective methods possible to reduce and control our CAC and drive organic traffic to our eBooks. We not only want Muslims to purchase our eBooks but also individuals from other religion to read and understand the Islamic books.

 

(b)       Retain Customers

It costs less to retain our customers than it does to create new ones.  Through our comprehensive Customer eCare Program, we intend to aggregate and analyze customer feedback on a periodic basis to determine key indicators to improve the interactive experience for our customers.

 

(c)        Reduce Churn

Every company loses customers.  Our goal is to analyze our attrition rates to determine why customers have abandoned purchasing our eBooks and to reduce or eliminate that drop rate altogether.  We intend to do this by offering incentives that will encourage dropped customers to communicate their reasons for leaving so we can reduce or prevent such abandonment of our brands.

(d)       Find a Healthy CAC/LTV Balance

We are fully aware that we must strike a business-critical balance between the acquisition cost and the lifetime value of our customers. Islamic e-Knowledge will constantly analyze our business model and operations to ensure that our overall CAC does not exceed our LTV.

 

(e)        Listen and Be Nimble

In brief, we believe that our competitors are spread too thin in their market reach or too narrow in their customer acquisition and retention goals. We’ll communicate fully, informing our customers through the Company’s blog what initiatives we are considering and why we will adopt some and not others.  This interaction with our customer base will be a major differentiator for us and contribute a great deal toward establishing the Islamic e-Knowledge brands as an impetus to build an interactive community of like-minded consumers and reading-related Muslims.

 

3.0   Market Analysis and Trends

 

Around the world, e-commerce is changing the way people shop. In the major consumer markets of Europe, the USA and China, e-commerce is fast becoming the preferred shopping method for many people.

 

In the US, figures from 2016 show that online shopping accounted for $394.86 billion in sales, 11.7% of all sales. This represents almost 42% of all growth in 2016 and is a 15.6% increase on online sales in 2015.1 In China, e-commerce accounted for 26.1 trillion yuan of sales in 2016, a rise of 19.8%. China accounts for 39.2% of all global e-commerce sales and there is a lot of growth potential left in this market alone. Currently, China reports that 731 million people are online, 53.2% of the population. 63.8% of those people shop online, meaning there is the potential for significant levels of growth over the next few years.

 

In 2016, total retail sales across the globe will reach $22.049 trillion, up 6.0% from the previous year. It is estimated that sales will top $27 trillion in 2020. Retail ecommerce sales—which include products and services (barring travel, restaurant and event ticket sales) ordered via the internet over any device—will reach $1.915 trillion in 2016, accounting for 8.7% of total retail spending worldwide. While the pace of growth for overall retail sales is subdued, the digital portion of sales continues to expand rapidly, with a 23.7% growth rate forecast for 2016.

 

Book Publishing is the largest sector of global content creation:

  • Publishing Trade, Educational, etc. –           $151 Bin
  • Movies and Entertainment             –           $133 Bn
  • Magazines                                     –           $107 Bn
  • Video Games                                     –           $63 Bn
  • Music                                                 –           $50 Bn

3.1     The Rise of Global EBook industry

 

The Global E-book market is the fastest growing sub-market in the worldwide book publishing industry. The Global eBook market accounted for approximately 12.6% of the Global Book Publishing market in 2014 and is expected to increase to 27.8% by 2019.

 

According to this research, Global E-book market is forecast to grow at a CAGR of 17.40% over the period 2014-2019. An e-book is a book available in the digital format, which allows readers to access content using their handheld devices without any time and location constraints.

 

Book Publishing Worldwide

Book Publishing has become the largest sector of global content creation at $151 Billion annually.

 

The Growing U.S. Book Market

The United States now represents 26% of the global publishing market. Most significantly, other markets outside of the six largest markets represent 39% of the global publishing market.

 

The Growth of Online Sales in the U.S

Beginning in 2012 and continuing today, online channels accounted for more U.S. book purchases than brick-and-mortar retailers.

 

The Growth of Online Sales in the U.K

In the U.K. both online book purchased increased to 37.7% of all book sales with brick-and-mortar stores representing 58% of all book purchases.

 

EBook Growth

Apple’s iBook store, which sells only ebooks within the “walled garden” of Apple OS and iOS devices, is gaining 1 million new customers each week.  This statistic shows that the ebook market will continue to grow exponentially—especially for Amazon competitors such as Islamic e-Knowledge.

 

Self-Publishing Growth

In 2013 alone, self-published titles grew more than 60%, an astonishing number from the previous year.  Even if the growth rate of self-published titles levels off, the growth rate is still impressive and speaks well to the future of our forthcoming eBook division.

 

 

 

The Popularity of Social Networking

According to Pew Research, 74% of all adult internet users utilize social networking worldwide.  This growth has not abated in 2014 and shows no sign of doing so in 2015, good news for the future prospects of our eBook division which will be marketed through social media.

 

The Exploding Tablet Market

Nearly 180 million tablets are expected to be shipped worldwide by 2019. Europe has been a leader in the global market since 2013, and was expected to ship some 102 million units in 2017. Shipments in the Asia Pacific region are projected to increase at a rapid pace, eventually passing Europe in number. By 2018, the Asia Pacific region is forecast to ship 108.6 million tablets. This excludes Japan, as the country’s market has a significant global presence on its own.

 

Apple has been the leading vendor in the tablet market since the second quarter of 2011, when the company held just over 60 percent of the market share. However, the company’s market share has been steadily decreasing over the years. As of the fourth quarter of 2016, Apple’s tablets accounted for around 25 percent of the market. While Apple has lost part of the market share, other tablet vendors have increased their share in the same time frame. Samsung’s share grew from 7.3 percent in the second quarter of 2011 to 15.1 percent in the last quarter of 2016. Huawei and Lenovo are also slowly taking a more significant portion of the global tablet market.

 

A similar trend can be observed in the tablet operating system market share. In the second quarter of 2010, Apple’s iOS held 94 percent of the market share, while nearly three percent of the market used Android’s operating system. As of the first quarter of 2015, Android had taken over the market, holding almost 70 percent of the share. Apple’s iOS accounted for 24 percent of the market, and Microsoft’s operating system made up seven percent of it.

 

 

 

3.2     Worldwide EBook revenue

 

  • Revenue in the “eBook” segment amounts to US$11,862m in 2018.
  • Revenue is expected to show an annual growth rate (CAGR 2018-2022) of 3.3 % resulting in a market volume of US$13,485m in 2022.
  • User penetration is at 10.5 % in 2018 and is expected to hit 11.8 % in 2022.
  • The average revenue per user (ARPU) currently amounts to US$21.94.
  • From a global comparison perspective it is shown that most revenue is generated in the United States (US$5,305m in 2018).
Year North America Western Europe Central & Eastern Europe Middle East and Africa Asia Pacific Latin America
  All amounts in million
2009 500 93 4 5 817 1
2010 1,200 176 9 9 952 2
2011 2,696 324 12 18 1,088 4
2012 4,326 574 28 37 1,269 8
2013 5,992 938 53 57 1,477 14
2014 7,653 1,339 77 80 1,748 27
2015 9,324 1,816 108 107 2,007 46
2016 10,905 2,354 144 137 2,257 73

3.3     EBook Industry United States

 

  • Revenue in the “eBook” segment amounts to US$5,305m in 2018.
  • Revenue is expected to show an annual growth rate (CAGR 2018-2022) of 0.1 % resulting in a market volume of US$5,330m in 2022.
  • User penetration is at 27.6 % in 2018 and is expected to hit 26.1 % in 2022.
  • The average revenue per user (ARPU) currently amounts to US$58.64.
  • From a global comparison perspective it is shown that most revenue is generated in the United States (US$5,305m in 2018).

3.4     Target Customers & Demographics

 

Business to Customers

 

The target customers for the Company’s B2C business can be characterized as:

 

  1. Persons who have an interest in reading Islamic books, whether it is in the form of books, audio books or other mediums.
  2. Persons who prefer the experience of online shopping.
  3. Persons who logically identify literacy and education improvement with books and reading..
  4. Persons who enjoy social networking, especially as it relates to books and reading.
  5. Most likely live or work in North America, Europe, Asia, or the 39% percent of the world classified as “Other Markets” in the expanding global book market.
  6. Have access to the Internet at work, home, and most likely, via one or more mobile devices.

 

Business to Business Customers

 

The Company’s B2B partners and sponsors can be characterized as:

 

  • Independent and established Muslim authors & scholars seeking new, emerging markets for their creator-owned content
  • Scholars seeking to add new, ancillary revenue streams for new and legacy portfolios
  • Publishing professionals who value literacy and education as an ideal within the context of book retail and distribution
  • Publishers seeking new avenues to distribute and sell their premium content

 

 

Customer Segments

 

  • 40% Male / 60% Female;
  • 5% are under the age of 45;
  • 5% have a Bachelor’s Degree or higher;
  • 55% employed full-time;
  • Household Income: 65% earn more than $50,000 annually;
  • 77% live in urban areas; 75% live in suburban areas; 76% live in rural areas;
  • 45% use the Internet daily;
  • 40% worldwide have purchased products or goods online via desktop, mobile, tablet, or other online devices

 

 

 

3.5     Market Characteristics and Trends

 

There are several important characteristics and trends in the eBook publishing industry that continue to provide Islamic e-Knowledge with the potential to become market leaders:

 

Success of Comprehensive Online Bookstores

 

The continued success of the book retail segments at Amazon.com and Barnes & Noble.com continues to demonstrate that a growing percentage of book buyers are adopting online commerce as their shopping experience of choice.

 

New and Emerging Markets

 

With 55% of the global publishing market comprising regions other than the United States, Brazil, Russia, India, and China, the worldwide reach for bookselling has never been greater.  This is especially true for ebooks, which are breaking down distribution barriers that have previously limited the sale and distribution of print books around the world.

 

Source: IPA Research, 2013

 

Technology Expansion

 

Ecommerce, broadband, and mobile technology is becoming more widespread and is growing globally at an astonishing rate. With the increasing deployment and adoption of these technologies, this is opening up new markets to book retailers, publishers, and publishing service companies.

 

 

New Marketing Models

 

From resurgence in traditional advertising to new methods of performance-based online marketing, integrating content and product is growing like never before.  By bridging the old and new worlds of marketing, this is increasing the effectiveness of online marketing initiatives and opening up new target markets for book buyers globally.

 

Ecommerce Growth

 

Ecommerce has become a trillion-dollar business worldwide.  This trend will continue unabated until online buying is the dominant method for making eBook purchases, regardless of the medium.

 

 

Social Networking

 

Best-selling authors, celebrity authors, and indie authors are all turning to focused social networking to build their audience and reach more new readers.  In addition, these same groups are learning to leverage established platforms such as Facebook and Twitter to maximize their exposure.

 

 

Growth of the Goodreads.com social network for readers – 2008-2012

 

3.6     Market Opportunity & Potential Revenue

 

Many eBook publishers do not report their market data; there are no definitive statistics on the potential growth of the online book market.  However, several strong indicators point to the overall market potential for the Company’s initial four divisions:

 

Ecommerce Sales: According to leading retail data firm EMarketer, Inc., 2013 saw online ecommerce sales—excluding tickets and travel—of more than $258 billion.

 

The Hard-Goods Merchandise Segment: Consumers in the U.S. spent $54.2 billion spent on the apparel and merchandise accessories segment alone in 2013, which bodes well for the apparel and merchandise segments of the Company’s retail business.

 

Worldwide eBook Sales: Total worldwide eBook sales are approximately $11.34 billion with expected significant growth expected in the next five years which will be as follows:

 

Year $ in billion Growth rate
2016 10.85
2017 11.35 4.69%
2018 11.86 4.47%
2019 12.38 4.34%
2020 12.83 3.65%
2021 13.18 2.70%
2022 13.49 2.35%

 

 

 

 

 

The Growing Global Book Market: 39% of the global book market is represented by new and developing markets outside of the U.S. or the other five top markets.

 

Social Networking: In the U.S. alone, social networking advertising revenues were $3.3 billion in 2013 and are expected to grow to $15 billion by 2018.

 


 

4.0   Company Overview

4.1     Overview

 

Islamic e-Knowledge will create the first truly integrated network of eBooks then converted into audio books and translated into different languages to give comprehensive Islamic eBooks collection to our readers. We will provide full and transparent range of products and services for the B2C and B2B markets in both book retail and publishing services.

 

The Company’s unique approach to new Islamic content will be crafted to provide a compelling experience for customers.  We will deliver unique and comprehensive content that inspires and converts them into long-term buyers and regular utilizers of the Company’s eBooks and other value-added services. The goal of the Company is Year 1-5 is to build a synergistic global community focused on reading, literacy, and education based on Islamic teachings, values and ethics.

 

Best of all, Islamic e-Knowledge is structured around a social-responsibility business model. Ultimately, the Company will carve out an Internet-based niche centered on Islamic eBooks a term that will become synonymous with digital and online Islamic reading.  The site will integrate lines of B2B and B2C business with uniquely targeted markets.  Consumers, publishers, Islamic scholars, authors, and artists will come to recognize Islamic e-Knowledge as a leader in the promotion, marketing and sale of its products and services in both global eBook marketplace and the author and publishing services marketplaces.

 

Company revenues will be generated from following specific sources:

 

  • Retail sales digital eBooks and content
  • Retail sales of audio and translated eBooks
  • Advertising from sponsors and independent content creators across both retail platforms;
  • Publishing and author services including distribution through all retail channels
  • Youtube video library

 

We recognize that a vital aspect of selling eBooks requires that the Company have a strong partnership with both content creators and content providers. In our case the content creators and content providers will be the Islamic scholars and authors and publishers who either already have their books or will write books specifically for us over the next five years. We aim to create a structure where Islamic scholars earn through our royalty program and this will substantially increase their motivation for further developing unique content for our eBook business. The Company will strive to develop and nurture new and ongoing relationships that will be critical to driving our long-term success.

4.2     Company Location and Facilities

 

We aim to create virtual office rather than a physical office. This will help us to focus our spending on core activities rather than on high rents and payroll expense. We aim to develop an IT infrastructure where all the permanent and temporary employees can work together on a portal and share the work with ease.

 

Our strategy remains consistent with the Company’s goal of operating at high-efficiency and with relatively low costs compared to our competition.  In addition, the Company will also achieve the highest possible customer satisfaction and consistently strong net returns for the Company, its customers, its partners and sponsors, and its stakeholders.

 

4.3     Legal Description

 

Islamic e-Knowledge to be founded as nonprofit organization under 501 (c) (3) as a nonprofit organization and will provide ebook, e-audio book; digital; e-content publishing; publishing and distribution services for Islamic literature; and other reading-related content and merchandise.

 

The organization will be established as per below procedure:

 

  • Checking the name for the organization i.e. Islamic e-Knowledge as it should not be in use by another organization
  • Preparation and submission of articles of incorporation for the nonprofit organization to the secretary of state’s office
  • Creating bylaws using a sample provided by secretary of state’s office or the bylaws form provided by the state
  • Obtaining a federal Employer Identification Number (EIN) from the Internal Revenue Service by completing Form SS-4
  • Applying for tax-exempt status from the IRS by completing Form 1024. A user fee will be included in the form of a check or money order. Once approved, we will receive a letter of notification, which will later be used to file for tax exemption at the state level.
  • Obtain tax exemption designation from state by submitting an application for tax exemption form to state’s tax agency

 

 

 

4.4     Legal Contracts

 

Our legal obligations with respect to publishing eBooks from other publisher’s content will be of the following two types:

 

  • The essential books which are required in our portfolio for spreading Islamic education and knowledge will be our first priority and thus we will be making royalty payment to the publisher/ writer once our cost of publishing the book is recovered
  • The second major issue is with respect to the books we are publishing for other publishers but they are marketing it themselves. We will publish them and will charge handsome amount for such services. Since we will be publishing substantial eBooks annually therefore our expertise in such work to earn revenue for the organization

 

4.5     Business Development Roadmap

 

The long-term Islamic e-Knowledge Business Development Roadmap encompasses building out the Company’s four (4) key business segments over multiple Development Phases between Year 1 and Year 5.

 

It is important to note that Islamic e-Knowledge should not be considered a short-term business model.  Building our brands into industry leaders will require time, dedication, and a long-term view of the growth of the eBook industry,  changing trends in the way people buy and consume what they love to read, and the way authors and artists create, publish, and distribute their content.

 

Each of the Company’s segments, beginning with Development Phases 1 to 4 during Years 1-5 as detailed below, will provide a strong foundation for the business as it grows and expands its product and service markets.

 

Development Phase I

This project is one of the very important projects as it includes converting existing English books written by Muslim scholars into eBooks. The phase I will include identifying the widely read Islamic books and then working with freelancers to get it converted to eBooks. These eBooks will be distributed through existing popular channels available like Amazon, Barnes & Noble etc.

 

 

 

 

Development Phase II

The second phase of our development plan will include conversion of our eBooks that are converted into Phase I into audio books. These audio books will help those who want to listen to books rather than read and thus will open a new revenue stream for the Company.

 

Development Phase III

The third phase of our project will involve translation of eBooks of the first phase into various different languages like French, German, Spanish, Chinese, Hindi, Urdu etc.

 

Development Phase IV

The fourth phase of this project will include developing own content through various Islamic scholars and authors who will be working with us in creating new and unique content for the readers. Those eBooks will also be converted into audio books and will be translated into multiple language books. Thus, will give us substantially new revenue segment and will develop the business into sustainable model.

 

4.6     Our Keys to Success

 

All screen design

We will design our eBooks to fit every screen i.e. mobile, tablet, iPad, laptops etc. We will make sure that our eBooks can be read of every electronic device which will give it a unique feature and will become our key towards success.

 

Focus on Islamic eBooks

Our business is not for profit; rather our aim is to promote reading habits in Muslims by giving them easy access of Islamic eBooks. We aim to create an environment where we provide our readers with widely read books available in electronic format at their convenience. The world is transforming tremendously and thus for Muslims to keep pace with this change they have to learn about their roots and history in order to remain connected with religious teachings.

 

Competitive pricing

We have kept the pricing model very competitive with prices ranging from $7 to $9.99 for our entire portfolio. This will help readers to purchase Islamic eBooks of various scholars and authors in low pricing and thus would impart education and learning across the Muslim community in USA and worldwide.

 

 

 

 

Relationships

The forging of relationships with the leading Islamic authors, content suppliers and distributors in the book market, the ebook market, and the reading-related merchandise market will help us to receive considerable content of Islamic books. We aim to develop long term relationship with Islamic scholars of all sects and getting their literary work to publish in form of eBooks for our readers across the work.

 

Distribution

Our key to success will be based on developing distribution relationships with the industry’s top retail websites in the book and comics industry.  These include Amazon, Barnes & Noble, Kobo, iBooks, Google Books, and more.

 

Team

Last but hardly least, the experience, commitment, and work ethic of the company’s team and board of advisors will be our key to success. We believe that our operational culture must include a strong customer service ethic.  This ethic must encompass both honesty and a genuine willingness to provide the highest levels of satisfaction to our stakeholders, authors, business partners, and customers.

 

Technical Competency

Our team headed by the Board of Directors has significant technical expertise for conversion of books into eBooks and running this successful venture for development of Islamic eBooks industry. The technical competency will help us to achieve our goals and objectives in an efficient manner.

 

Marketing

Another key to our successful operations are the marketing activities to be performed by our organization. We aim to create a robust and vibrant marketing campaign that will improve the product awareness and eventually will contribute towards increased unit sales.

 

Building a supportive community

In the end when we look at our cause, it’s a social one with no profitability to the investors rather we want to build a community which understands the importance of education which should result in educating our future generations.

 

 

 

4.7     Business Objectives

 

Islamic e-Knowledge will implement the following strategies to achieve its goal of establishing a leading publisher of Islamic eBooks:

 

Strategic

  • Our primary objective is to publish Islamic books in eBooks to help our customers have easy access to read books in a digital way in this every evolving globe
  • To provide a substantial avenue for growth of this business for the overall development of the Muslim community in the United States and elsewhere
  • To implement our development roadmap of development audio books, eBooks in various other languages along with creating own unique content through Islamic authors
  • To achieve acceptance in the eyes of readers within the target markets by building a sustainable brand image that resonates with effectiveness and efficiency
  • To continuously introduce new and innovative ideas that will keep us ahead of market competition to achieve long term sustainable growth
  • We also aim to develop trust with authors and developers that will help us to create a long lasting relationship with them.

 

 

Operational

  • Comprehensive social media marketing strategy for creating brand awareness within the United States initially and thus reaching the target readers to achieve projected growth in revenues
  • We aim to ensure highest quality of customer services by outsourcing our customer support to a reliable partner. We want to ensure that customers are served on priority and without any delay.
  • To hire around 2 full time employees in year one. Our employment motto will always remain “Stay Lean to Achieve Growth”

 

Financial

  • To raise $150,000 as financing in the first year for starting the operations in January 2018 and executing the business strategy
  • We aim to achieve profitable operations in 3rd year by generating approximately $686,000 in revenues
  • We aim to achieve net profit in excess of $700K in fifth year of operations

 

4.8     Business to customer

 

  • Leverage our status as a not-for-profit social-betterment model that supports Islamic literacy and education to help establish our brand as “preferred” in the minds of readers.
  • Develop strong, secondary revenue to stream to books through associated merchandise including t-shirts, bags, coffee mugs, and other commercially-produced apparel items (education material, books etc.)
  • Development of Islamic curriculum for schools, colleges, universities and other educational programs on special request of the institution will help us to create our niche in this ever growing education industry
  • Create a new, exclusive revenue stream by partnering with independent authors to provide them with publishing services for eBooks.
  • Foster key industry relationships with scholars, authors, publishers, merchandise manufacturers.
  • Leverage investments in our chosen technology platform to create a measurable, scalable marketing and ecommerce platform that will enable better and more efficient integration with our partners and sponsors.
  • Offer industry-leading customer service, branded as the “Customer eCare Program.”
  • Built a strong Board of Advisor of experienced professionals from the Islamic scholars, publishing and ecommerce industries.

 

 

 

4.9     Competitive Advantag

 

(a)       A Core “Social Responsibility” Business Model

Converting Islamic books into eBooks is our business model as well as our key social responsibility towards our religion and our youth.  This is a key component in the company’s efforts and will be the primary image it presents to the public.  These initiatives are of critical importance to the Company’s founder and epitomize the driving philosophy behind the company’s primary slogan of imparting knowledge.

 

(b)       First mover advantage

Islamic e-Knowledge will be a true “first mover” in creating this model of converting Islamic books into eBooks, audio books, translation into multiple languages and creating new Islamic books content.  The Company is also a first-mover in creating a comprehensive online Islamic reading-related business model that utilizes a social-betterment business philosophy to support literacy and education causes worldwide.

 

(c)        A Strong Management and Advisory Team

Together, the founder, partners, sponsors, employees and advisors to the Company share over twenty years of combined retail, accounting, software, publishing, management, IT, artistic and marketing experience–all backed by a strong philosophy of integrity and reliability.  Just as importantly, our team members share a commitment to increasing global Islamic education and literacy, a keen awareness of environmental concerns, and a firm belief that the growing global book industry will do much to help to solve many critical societal issues around the world.

 

(d)       Strategic Growth Plans

Moving forward beyond 2018, the Company plans to develop its second major revenue stream, audio books and translation of books in various global languages.  In addition, the Company plans to remain nimble enough it can quickly and efficiently adapt to changes and growth patterns in the marketplace, allowing rapid movement capable of capitalizing on emerging industry trends.

 

(e)        Maximized Operating Efficiencies

Islamic e-Knowledge will leverage its careful investment in affordable, efficient technologies to realize unprecedented cost savings and efficiencies in eBooks publishing infrastructure, management resources, organization structure, and overall business operations.

 

4.10     SWOT Analysis

 

(a)       Strengths

  • Our website will register the authors, customers and other visitors and will give them direction from our own website how to place the order and ship it to their home
  • Our operating costs will be approximately 44% of our revenue in the first year which will be reduced to 3% in year five. It will help us to increase profitability in the long term
  • Cashless transactions will be another advantage through linking it with online payment management system on the online book sellers website

 

(b)       Weaknesses

  • Replication of our business model is very easy and will not take more than two to three years for new startup to do so. We are planning heavy investment in creating own content after third year onwards which will help us to offer unique proposition to our readers.
  • We have kept marketing budget a bit on lower side due to reducing overall expenditure and increase the profitability.

 

(c)        Opportunities

  • There is no specific publisher available having a mode like this before where Islamic publications are being transferred as eBooks
  • The online eBook industry is going through substantial innovation with new publishers coming and expanding their operations.
  • The eBook market is expected to grow 3.3% in the next five years and thus we can expand our operations in this growth momentum

 

(d)       Threats

  • Competitors might expand in this niche market and would try to snatch our early mover advantage
  • Technology has been changing substantially over the past year and thus this pose significant risk for this ever evolving industry. We need to work continuously in order to update our technological platforms to remain competitive in the industry.

 

 

 

4.11     PESTL Analysis

(a)       Political

The eBooks publishing business is usually deregulated across the globe with pricing and other decisions in the hand of publisher rather than any government organization. Apart from this, there is no major impact of any political problem between our company and any external party which shows that political stability between both of these are appropriate. Some of the scholars in few religious countries might be political and hence is important for us to remain neutral in all political circumstances.

(b)       Economic

The US economy has significantly improved after the 2008 recession and since then the technological evolution has helped it to further expand upward. The time is absolutely correct to invest in the eBook publishing industry since this industry is expected to expand substantially over the past five years. Over the next five years the eBook industry is expected to take giant leaps in terms of innovation and market size, thus we are rightly placed at achieving our desired market share.

 

(c)        Social

The technological evolution has been socially accepted across the board over the past decade. eBooks reading has been accepted by various circles and thus the social barriers have been eliminated which is giving a significant opportunity for the entire industry to grow over the next five years of operations.

 

(d)       Technological

The technological changes over the past decade have been gracefully accepted by the students and it has significantly improved the study they have been doing in schools and colleges. The current environment is conducive for launching Islamic Ebooks since the industry is currently expanding and new products are expected to launch by various companies. Thus, overall the technological environment is very encouraging for launching a business that caters to a large market segment.

(e)        Legal

The legal environment and the various protections given under the right laws to the customers will give a tough time to companies operating online businesses. We aim to comply with the laws and regulations of all the countries in which we aim to expand our business operations. The legal regulations with respect to book publication might require additional compliance which we aim to complete before starting our operations. Laws regarding book publishing are changed across the world and we might require our team to remain vigilant about the laws and to provide them on a timely manner.

 

5.0   Management & Staffing Summary

 

Our management’s philosophy is based on responsibility and mutual respect for its customers (consumers), its partners (authors, and publishers), its sponsors (publishers and independent authors), its employees, and its stakeholders. The Company will maintain a business environment and structure that prizes productivity, the highest-quality attention to its customer base, and an operational environment of responsibility, loyalty, and fun.  This will service to motivate our team members while building a sense of pride and ownership in the Company’s efforts to help change the world through the power of reading islamic books.

 

 

5.1     Officers, Advisory Board and Key Team Members

 

It is important for Company to have an experienced team of individuals working together for establishing the operating infrastructure in the first place and then gradually developing a profitable organization. This idea is the brainchild of Mr. Osamah who will be working in the board of directors:

 

Mr. _______________– Chief Executive Officer

  • Raising the initial investment of $150,000 from the key investors
  • Preparing short, medium and long terms goals for expanding Islamic knowledge
  • Implementation of long and short term strategy of the Company that will help to achieve the goals and objectives in order to start and then sustain profitable operations
  • Cash flow management with an aim to provide sufficient liquidity to the Company
  • Evaluation of the actual results of operations with the budget set out at the start of the year in order to measure performance
  • Continuously working with team in order to increase the number of titles
  • Reaching the target market of the Company with the help of implementing marketing strategy and effectively executing the marketing activities
  • Providing incentives for external sales team in order to motivate and encourage them which will help the Company to increase revenue and profitability
  • Working extensively with innovations and providing unique reading experience helping the readers to achieve their objectives

 

5.2     Personnel Plan

 

The full-time staffing requirements for the Company on Day 1 will consist of the following employees:

 

  • Project Manager
  • Accountant

 

This staffing structure provides a great deal of flexibility and allows communication to disperse quickly and directly between all parties. Because of these characteristics, there will be few coordination problems at the Company of the type commonly experienced within larger organizational chains. This strategy will enable the company to react quickly to changes in the marketplace.  In addition, the utilization of outsourced publishing services for our eBooks will also keep personnel costs to a minimum during the first five years of operation.  It is management’s intent to hire outsourced publishing and editorial staff at the point it becomes financially prudent to do so, and to use performance tracking to retain their services.

 

Description Year 1 Year 2 Year 3 Year 4 Year 5
Project Manager 24,000 26,400 29,040 31,944 35,138
Accountant 12,000 12,600 13,230 13,892 14,586
Total 36,000 39,000 42,270 45,836 49,724
Payroll tax 3,600 3,900 4,227 4,584 4,972
Total expenses 39,600 42,900 46,497 50,419 54,697

 

5.3     Board of Governors

 

Our board of governors (BOG) will be experienced indiviuals having expertise in information technology, finance, human resource, marketing and operations. The four major categories for sub committees of BOG will be as follows:

 

  • Book and material selection
  • Technology – We aim to provide them with top notch IT security
  • Marketing – responsible for supervising marketing of product
  • Financial – responsible for supervising financial transactions

 

 

 

6.0   Financial Plan

 

6.1     Major Assumptions

The financial plan has been prepared after taking into account certain assumptions that have helped us to prepare a comprehensive proposed financial model for the business. The financial model has helped us to evaluate our future profitability along with identifying the areas which needs cost control and reduction for achieving sustainable growth.

 

(f)         Selling Expenses

Our plan is to promote the eBooks through existing eBook channels available that include websites already discussed above. We have benchmarked Amazon’s Kindle Direct Publishing (KDP) which has the below schedule of royalty that it deducts from each and every sale:

Range Amazon fee (%age of revenue)
$0.01 to $2.99 65%
$2.99 to $9.99 30%
Above $9.99 30%

 

We have priced all our books in the range of $2.99 to $9.99 in order to reduce the cost of amazon fees and increase our net revenue from the sales. This will facilitate authors to get increased royalty and company to increase its profitability.

 

(g)       Author’s share

Our primary stakeholders are the authors who will be working with us as our partners. We will be publishing their content from paperback to eBooks and in return will be paying them a royalty fee for each unit sold through any of our channels. The amount payable to authors will be calculated after deducting the selling expense described above. The share of author’s royalty is estimated to be 15% of the net revenue i.e. after deducting selling expense.

 

(h)       Growth in unit sales

We have evaluated the sales of eBooks in the market and we have developed a rational growth in the unit sales of all the segments over the period of five years. We have assumed that we can easily achieve a growth of 40% year on year in the first five years due to increased number of titles and diversification in the business model that will include audio books, eBooks in multiple languages as well as our own unique content.

 

 

6.1     Summary – Startup Period

 

We aim to create a lean organization with an aim to reduce the startup investment required for business operations. We have calculated the startup capital requirement based on the following factors:

  • Publishing of around 60 eBooks in the initial teething phase of business
  • Personnel expense required for the first year of operations
  • Working capital requirement for first year of operations

 

Description Amount in USD
Creation of eBooks 60,000
Personnel Plan 40,000
Working Capital 50,000
Total investment required 150,000

 

We have kept $60,000 for creation of eBooks, $40,000 for managing payroll expense and $50,000 for working capital needs of the organization. This amount has been rationally set in order to reduce maximum burden from the financers along with keeping into account the cash flow needs of the organization.

 

 

6.2     Summary Income Statement – Revenue

 

We will be establishing the Company as an organization with the profits going through development of new products which will help to achieve long term sustainable growth. Our revenue will include four streams as discussed in prior section. The revenue projections are expected to be as follows:

 

Description Year 1 Year 2 Year 3 Year 4 Year 5
eBooks 97,500 307,125 752,456 1,662,928 3,480,035
Audio books 0 41,250 135,713 337,347 750,775
Multiple language books 0 0 29,963 98,577 245,036
Own content 0 0 0 32,500 121,875
Total revenue 97,500 348,375 918,131 2,131,352 4,597,721

 

Conversion of existing books into EBooks will be the major revenue generating segment for the Company with generating around $97K in the first year and increasing it to $3.48 million in the fifth year. The second major revenue stream will be the audio books because it is easier to listen to books then reading them. Our audio Islamic books will give us revenues of more than $750K million in fifth year. The increase in revenue will surely contribute towards achieving our long term goal.

6.3     Summary Income Statement – Direct Expenses

 

(a)       Selling expenses

 

We will be publishing our books on Amazon and other sites which charges an approximate cost of 30% as royalty from the sale of eBooks/ audio books and other. The selling expenses are calculated with the context that they will be required to be paid to Amazon against every purchase. Following is the breakup of selling expenses:

 

Selling Expenses Year 1 Year 2 Year 3 Year 4 Year 5
EBook 29,250 92,138 225,737 498,878 1,044,010
Audio books 0 12,375 40,714 101,204 225,233
Multiple language books 0 0 8,989 29,573 73,511
Own Content 0 0 0 9,750 36,563
Total selling expenses 29,250 104,513 275,439 639,405 1,379,316

 

 

(b)       Publishing cost

 

Publishing Cost Year 1 Year 2 Year 3 Year 4 Year 5
Ebook 100,000 125,000 168,750 227,813 307,547
Audio books 0 75,000 101,250 136,688 184,528
Multiple language books 0 0 60,000 81,000 109,350
Own Content 0 0 0 90,000 135,000
Total cost 100,000 200,000 330,000 535,500 736,425

 

 

(c)        Author’s share

 

Author’s share Year 1 Year 2 Year 3 Year 4 Year 5
Ebook 10,238 32,248 79,008 174,607 365,404
Audio books 0 4,331 14,250 35,421 78,831
Multiple language books 0 0 3,146 10,351 25,729
Own Content 0 0 0 3,413 12,797
Total author’s share 10,238 36,579 96,404 223,792 482,761

 

6.4     Summary Income Statement

 

The income statement shows the projected profitability of the Company over the next five years. We aim to achieve an average of 167% year on year increase in revenue from year two to year five. This will help us to establish ourselves in the market as the one of the leading Islamic eBook publishers. The profitability below will help the Company to diversity its attention in other ventures with an aim to promote the Islamic system and its benefits across the globe.

 

Description Year 1 Year 2 Year 3 Year 4 Year 5
Revenue 97,500 348,375 918,131 2,131,352 4,597,721
Cost of sales 139,488 341,092 701,843 1,398,697 2,598,502
Gross Profit (41,988) 7,283 216,288 732,654 1,999,219
Operating Expenses
Personnel Plan 39,600 42,900 46,497 50,419 54,697
Legal Fees 2,000 2,000 2,000 2,000 2,000
Marketing Expense 2,700 2,700 2,700 10,000 15,000
Total operating expenses 44,300 47,600 51,197 62,419 71,697
Net Profit (86,288) (40,317) 165,091 670,235 1,927,522

 

The Company will incur gross loss in the first year mainly due to low volumes and payments to authors but since the volumes are expected to grow from second year onwards we are expecting the gross loss to be converted into gross profits. The gross profit is expected to increase substantially from second year till fifth year of projections since the direct cost would be the author’s expense which is expected to be substantial over the five year period.  The gross profit will increase from $7K in the second year of operations to $1.9 million in the fifth year. This will help the company to use this GP in marketing expense and development of overall brand.

 

The Company will incur losses of $40,317 but will improve from 3rd year onwards where it expects to achieve a profitability of $1.9 in the fifth year of operations. The net earnings will help the Company to retain some profits along with further working in new ventures by the organization in future years.

 

 

 

 

 

 

 

 

 

6.5     Projected Balance Sheet

 

The projected balance sheet of the Company for the next five years shows the impact from the investment by investors. Losses will be incurred in the initial years but the Company is expecting to cover up all those losses by the end of Year 5 which will eventually help it to establish itself as a successful startup. The assets of Islamic e-Knowledge will grow from merely $63K in 1st year to approximately $2.7 million in the 5th year that shows and will perform as a sustainable organization.

 

 

Description Year 1 Year 2 Year 3 Year 4 Year 5
Assets
Cash 63,713 23,396 188,487 858,722 2,786,244
Total assets 63,713 23,396 188,487 858,722 2,786,244
Equities
Initial investment 150,000 150,000 150,000 150,000 150,000
Accumulated profit (86,288) (126,604) 38,487 708,722 2,636,244
Total equities 63,713 23,396 188,487 858,722 2,786,244

 

 

6.6     Projected Cash Flow

 

Our Company is expecting investments to flow in the first year amounting to $150,000 which will help it to establish itself in the industry. The initial losses to be incurred in the initial two year will eventually be absorbed by the profits generated by the business. The projected cash flow statement for next five years is as follows:

 

 

Description Year 1 Year 2 Year 3 Year 4 Year 5
Cash flow from operations
Net profit (86,288) (40,317) 165,091 670,235 1,927,522
Cash flow from financing
Initial investment 150,000
Cash flow for the year 63,713 (40,317) 165,091 670,235 1,927,522
Cumulative cash balance 63,713 23,396 188,487 858,722 2,786,244

 

 

 

6.7     Discounted Cash Flow Analysis

 

The discounted cash flow technique has been used in order to evaluate the valuation of Islamic e-Knowledge based on five year projected cash flow analysis. As per the valuation based on DCF we can assume that the value of the Company is approximately $2.8 million based on an investment of $150,000 in the first year of operations.

 

The business model is such that it does not require any extensive capital investment rather it will be operated through various freelance services that will be used for conversion of books into eBooks or audio books. Thus this will help the Company to have substantially high free cash flows and thus would eventually increase the value of discounted future cash flows.

 

We have calculated a comprehensive weighted average cost of capital which came out at 5.76% and have been used to calculate these cash flows.

 

Description Year 1 Year 2 Year 3 Year 4 Year 5
Free Cash Flow
Earnings Before Income Taxes (86,288) (40,317) 165,091 670,235 1,927,522
Amortization & Depreciation 0 0 0 0 0
Capital Expenditure 0 0 0 0 0
Free Cash Flow to the Firm  (86,288) (40,317) 165,091 670,235 1,927,522
Discount Rate 5.76%
Discounted Cash Flow Value (81,588) (36,045) 139,559 535,724 1,456,774
Terminal Value 873,710
Total Cash Flow Value 2,014,425
Total Value as per DCF 2,888,135