Managing Information Technology

Case Study I-2 • VoIP2.biz, Inc.: Deciding on the Next Steps for a VoIP Supplier 139

Financial Projections As part of the process of preparing
the investment proposal, Milkowski had prepared a set of
detailed assumptions about the future of the business. A
summary of those assumptions is shown next:

• The company would enter additional markets on the
  following schedule:
  
  
  • One market in October 2006
  
  
  • Two markets in 1Q 2007
  
  
  • Two markets in 2Q 2007
  
  
  • Two markets in 3Q 2007
  
  
  • Two markets in 4Q 2007
  
  
  • Two markets in 1Q 2008
  
  
  • Two markets in 2Q 2008
  
  
  • Two markets in 3Q 2008
  
  
  • Two markets in 4Q 2008
  
  
  
  


• The average customer fee per line would be $26.50
  per month.


• Sales would be 65 percent systems and 35 percent
  hosted.


• Sales would come from:
  
  
  • In Indiana: 75 percent direct/25 percent authorized
    distributors
  
  
  • In additional markets: 25 percent direct/75 percent
    authorized distributors
  
  
  
  


• The cost to acquire a new customer would be around
  $120.
  
  
  • 20 percent of the current customer base would leave
    after the first year of service.
  
  
  • VoIP2.biz would outsource call center technical
    support at $0.55 per minute.
  
  
  • Network engineering would be conducted at the
    Indianapolis headquarters; local market staff would
    conduct station reviews and installations.
  
  
  
  

Using these assumptions, Milkowski developed a projected

statement of earnings (see Exhibit 4) and balance sheets

(see Exhibit 5) through 2009.

The Options

As Milkowski thought about what he was going to present

to the board, he began considering his options. The first

option was to move forward with the Phase II Plan. He was

very proud of the progress made in Phase I. For an invest-

ment of about $1 million to date, VoIP2.biz had the follow-

ing accomplishments:

• Completed the installation of the network tech-
  nology to support deploying VoIP solutions at
  customer sites,


• Tested and debugged the technology, making
  selections on the components to be included in its
  solution set,

The summary included below includes the forecasted income statement for the Indianapolis operation, which includes sales and deliv-

ery for the Indiana marketplace, plus centralized engineering, procurement and material management, and corporate management. The

summary also includes the forecasted income statement used in building this business plan for each additional market that VoIP2.biz

enters. While the experience and results for each market will likely be unique and may vary significantly from the forecast shown, the

forecast was based on the experience the management team has had opening and operating in the greater Indianapolis marketplace.

The overall financial projections in this business plan were derived by applying a specific phased launch schedule and totaling

financials for each period by matrix math against the “each additional market” forecast. The launch schedule for additional markets as

used in this business plan was:

Phase I - First Segment:

• One market in July 2006


• Two markets in October 2006


• Two markets in January 2007

Phase II - Second Segment

• Two markets in 1Q FY2008


• Two markets in 2Q FY2008


• Two markets in 3Q FY2008


• Two markets in 4Q FY2008


• Two markets in 1Q FY2009


• Two markets in 2Q FY2009

EXHIBIT 4 Projected Statement of Earnings