Below is the Business Feasibility and Market Research that was turned in to the BusinessImpactNW as the requirements for the next round. Any feedback would be greatly appreciated.
Business Feasibility for cavnessHR
First, I would like to talk about the great team at cavnessHR. Without the great team at cavnessHR, none of this would be possible. Currently, we have two software developers working on the cavnessHR MVP. Both are Computer Science Students at Green River College. Where they are undergoing a vigorous education in Computer Science. They are helping to build a great product.
Myself, Jason Cavness, has over 25 years’ experience in HR. I did HR for 25 of those years in the biggest corporation in the world. The United States Army. I also have three years’ experience in the startup world. To include setting up HR for a startup called MyUnfold. While at MyUnfold, I like to say that I did everything except design and code. I am also SPHR certified with a Master’s in Human Relations from the University of Oklahoma.
There around 543,000 new reasons every month why cavnessHR is a feasible business idea. According to the Small Business Administration (SBA) around 543,000 thousand new businesses start each month. According to the SBA there are over 5 million small businesses in the U.S. These businesses account for the employment of over 31 million people and over 1,154,769,764 ($1,000) in annual payroll.
The U.S. Human Resources Outsourcing industry includes about 8,000 establishments with combined annual revenue of about $17.5 billion.
Demand for outsourced HR is driven by the needs of businesses for outside HR advice. The ability of companies providing HR Outsourcing to make a profit and stay in business is based on many factors. Two of these factors are the ability to have a constant stream of business and the ability to market their business.
However, despite the number of HR Outsourcing firms and HR Consultants, most small businesses do not have anyone conducting the HR business function for them. There is a misconception that most companies have HR. Either through a dedicated HR person or by using a HR Consultant. However, many small companies do not have anyone dedicated to conduct the HR Business function for them.
One reason many small companies do not have dedicated HR is the cost associated. The cost for an internal HR person can be from $50,000 to $100,000 or more per year. You then have HR Consultants who charge from $175 to $400 or more per hour. Both current options are cost prohibitive to small business. Which is one of the reasons why small business owners make the decision not to bring on HR. They make HR an additional job responsibility for an employee who already has a full-time job. New businesses cannot afford the high cost of HR as it is currently delivered.
This puts them at risk for various compliance challenges and places them at risk for not being able to scale. This also places them at risk for not paying their employees correctly. (either too high or too low) Which causes them not to be competitive in both recruiting and retaining talent. These are just some of the risks small companies take by not having HR. It is estimated that small businesses lose $29 billion per year when they use risky ad hoc HR.
We will provide great HR by providing seamless HR using existing cloud technologies. Our competitors use high interactions and high touch points with the customer. cavnessHR will provide great customer service using low interactions and low touch points. This will enable cavnessHR to significantly reduce the price. We believe that we don’t have to be in your work location to provide great HR.
The ability to significantly lower the price and to provide HR without having to be on site will be appealing to our potential customers. The ability of cavnessHR to provide instant updates on HR issues will also be appealing to our customers.
cavnessHR will meet capacity by having all data stored on a local database that we will link to our customers. Once cavnessHR outgrows the storage of this local data base. We will convert to a storage service such as Amazon Web Services. This will enable seamless delivery of HR to all customers. It will allow for updates of all previously provided HR. cavnessHR will deliver all HR using this cloud based system.
cavnessHR anticipates several challenges during our startup phase. One is the ability to bring on skilled software developers. cavnessHR will require developers who are skilled in various coding languages. We will also require developers with the ability to link cavnessHR to our customers using cloud based technologies. We will overcome this challenge by networking at various events such as Operation Code and other startup events to talk to developers about joining the cavnessHR team. We will also reach out to potential developers via Angellist to recruit developers to the cavnessHR team. We will also participate in various discussions on various social media platforms to learn better ways to recruit software development talent to cavnessHR.
Another challenge is the current lack of a Chief Technology Officer. (CTO) Currently, we do not require a CTO. But as we grow and gain customers and our requirements for more technology expands. We will need a CTO who can link all the tech requirements together with our business requirements. I also want to bring on a CTO in the future who will serve as a mentor to our young developers.
Another challenge will be marketing cavnessHR. With 30 competitors in the area and the fact that most small business does not think about HR. We will need an aggressive marketing campaign to spread the word about cavnessHR and the value we can add.
As noted above, we will be able to charge significantly less, while providing great HR to our customers. We are going to charge based on the number of employees. For example, our price for a company with 45-49 employees, which is our highest price, will be $33,004.40 per year. Or $2750.36 per month for a monthly subscription. This does appear expensive at first. But when compared to having a dedicated HR hire, who would cost from $50,000 to $100,000 per year. Plus the benefits you would have to provide. Then to a HR Consultant at the cheapest rate of $175 an hour for 10 hours per week. Which comes to $91,000 per year. The price advantage of cavnessHR is clear.
Finally, from January 2016 to June 2016, we talked to 331 small business owners and founders across the U.S. The feedback we received was encouraging. 71% stated that cavnessHR was needed in the small business market. We believe this stat proves that cavnessHR is a feasible business idea.
cavnessHR Market Research
Business Description and Vision: cavnessHR delivers great HR to every company with less than 50 employees in the U.S while transforming the HR Outsourcing industry.
Definition of the Local Market: The Seattle/Tacoma area Human Resources Outsourcing industry includes about 30 establishments with combined annual revenue of about $25.7 million.
Market Demand: for outsourced HR is driven by the needs of business for outside HR advice. The profitability of individual companies providing this HR service depends on the efficiency of their operations and their ability to maintain a steady flow of business. As the economic landscape continues to shift, small companies may wind up being so focused on core business issues they overlook one of the most serious and costly issues: Human Resource compliance. It is estimated that small businesses that use risky ad hoc HR lose around $29 billion every year.
Initial Target Market: will be the Seattle/Tacoma metro area. The estimated revenue for establishments doing Human Resources Outsourcing in the Seattle/Tacoma metro area is roughly $25.7 million.
Overall Target market: for cavnessHR is all U.S. businesses with less than 50 employees. The current plan is to target the local market and then expand to other states and then nationwide. Around 543,000 new businesses start in the U.S. each month. According to the Small Business Administration there are over 5 million small businesses in the U.S.
Products and Services Provided: Companies in this industry provide products, services, advice and assistance to businesses about Human Resources and personnel policies, employee compensation and benefit planning and various other HR topics.
Competitive Landscape: Demand is driven by the needs of business for outside HR advice. The profitability of individual companies depends on the efficiency of their operations and their ability to maintain a steady flow of business.
Competitors: There are many companies in the Seattle/Tacoma area that are under the umbrella of HR. Some do all HR functions as part of their outsourcing. While others only provide single HR functions such as recruiting/hiring or company culture. The leading HR companies that provide outsourcing in the area currently are UniquelyHR and ResourcefulHR. Both are Seattle based companies who cater to startups and small to mid-range size businesses.
Competitive advantage: HR is now delivered to small business by high interaction and high touch points. We believe that great HR can be delivered to small business without a high interaction between the small business and cavnessHR. While still providing great customer service. cavnessHR will deliver great HR through a cloud based system, that will allow for the minimal amount of interaction.
cavnessHR is in business to transform the HR Outsourcing industry.