HKRUSHBUSINESS PLAN

Prepared by:

LI MING LOK/ SIU CHI TIM/ LO CHEONG WA

14/7/2015

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Table of Contents

Page

1) Executive Summary 3

2) Service 4-6

3) Marketing Strategies 7-10

4) Financial Plan 11-18

5) Marketing and Promotion 19-20

6) Organisation Chart 21

Executive Summary

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Who We Are?

HKRush is a logistics startup filling the gap of same-day delivery in Hong Kong. The P2P platform created secures delivery efficiency at a reasonable price by crowdsourcing the logistics network in the city.

It is founded by three passionate youngsters who have worked in a renowned logistics firm after graduation. Breaking the old rules of logistics industry would be our vision behind. This model invites all residents in Hong Kong to join our team. Everyone could be couriers and everyone can earn money.

This model also helps to increase the competitiveness of online sellers by improving the shopping experience of customers as goods can be delivered within hours.

What are our Goals?

Our goal is literally related to our company name - HKRush. Creating the most efficiency logistics network is our first goal for the people and for the society. Better utilizing the hidden resources in the society and building a better relationship for the people in the “crowd” would be the second goal. If we could make these achievements, a better society could be built.

Financial Summary

Our revenue-generating model would be mainly by charging commission from the freight rate and cultivating a new shopping habit for the customers after our logistics network is mature.

This financial plan was developed based on our existing cash amount and tracking trends in revenues and expenses. A three years track of sales with related expenses has been estimated. Sales of the first year are projected about 1.5 million, with a net loss of HKD158,500 since no commission would be charged as we want to strengthen our logistics network. Major expenses would be spent on promotion and the set-up cost. The net profit ratio will increase to 4.58% and 8.44% respectively when we starts to cooperate with business in O2O delivery in Year two.

Service

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1. Nature and feature of service

I. Crowd sourced same-day delivery platform

HKRush provides a solution for simple, affordable, and convenient same-day delivery. This bridges the last mile gap between business to customer or customer to customer.

The peer to peer logistics platform we built helps the society to unleash the potential logistic power. We act as a middleman to bridge the information gap between sender and courier. This helps to better utilise the hidden logistics power in Hong Kong. Simply registering as a courier through our application and providing the required information, everyone could be a courier. This is the main idea we would like to bring out. Sender can match with courier, vice versa, through our platform without hassle.

The platform will be built in three ecosystems – Android, iOS and desktop version in order to suit the needs of different markets. Mobile version provides a basic interface for normal users to create a delivery. Web version mainly targets businesses which need a large input of data and a sophisticated interface providing feedback and tracking from a list of waybills.

2. Business goal

I. Searching new source of capital

This business model requires capital support to fasten the implantation of demand among citizens in the first stage and diversify the service lines in the second stage of development. Hunting for capital injection from different seed funding would be our primary goals in the coming years. This can put our business on the fast track to growth.

II. Generating new source of revenues

We would like to involve every citizen to join our platform and create an enormous logistics network. Hidden resources in our city can be better utilised. By spending a year to consolidate our logistics networks, providing convenience to people in everyday life would be our ultimate goal.

The first one we would like to revolutionise is the online shopping experience. By cooperating with O2O sellers, express delivery within two hours to the users can be promised at a reasonable price. This helps sellers to solve the last-mile problem and increase their competitiveness comparing to the physical store.

Creating a “one hour living circle” would be our second goal. Delivery from food takeaway to fresh produce would be available within an hour in our second stage. Just a few clicks on their smartphone, they can get whatever they want without hassle.

III. Building brand recognition

Innovative, reliable and trustworthy would be the image we would like to implant on every user. Such image is essential for us to develop our service lines and negotiate with businesses.

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IV. Finding new markets for our services

For the traditional express industry (business to business), we would like to be a game changer and rejuvenate the local delivery market and provide flexibility to small firms. Higher efficiency and shorter transit time are the things lacking in the current market. That is the reason why we are here and that is what we are trying to offer.

3. Industry Outlook

PayPal expects the total online sales volume in Hong Kong would be over USD2.5 billion in this year. We could foresee there will be a continuous uphill climb for the demand of local deliveries as the O2O sales volume keeps raising in the past several years.

Delivery of daily necessity would be the next arena as smartphones make shopping easier and sellers could make direct contacts with customers just through a mobile application. We could foresee the market expanding at a faster pace in the near future.

Insufficient manpower, however, hinders the growth in logistics field. One of the challenges in attracting new blood to the industry is that the working condition is considered tough by the new generations.

4. Service Niche

What we offer on this platform is door-to-door same day delivery. The platform helps us to match out the best delivery route and provide the easiest way to get the things done.

Platform Transit Time Tracking Areas covered

Delivery efficiency & flexibility

SMS verification

Specified delivery time

Insurance

HKRushP2P Platform

Within two hours

GPS, real time tracking

All regions including outlying islands

4 Yes Yes Yes

Traditional couriers

within six hours

Only sizeable couriers provide limited tracking services

Major commercial areas

1 No No Yes

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In-house delivery team

Depends on route planning

No All regions excluding outlying islands

2 No No Yes

Logistics start-ups

Within two hours

No All regions excluding outlying islands

3 No Yes No

Same day Delivery:

Remark: 4 is the highest and 1 is the lowest

A comparison has been made across us and different competitors from the table above.

The most apparent advantage would be the safety measures we have done. Real time tracking of parcels could be possible as courier’s phone helps to identify its location. Verification code will be sent to receiver’s phone number and need to be entered when the parcel is delivered. This ensures the parcel is delivered within the promised hours to the right consignee.

Regarding cost-efficiency analysis, the highest efficiency with the lowest price is provided to our users. Every courier under our platform basically could deliver only one to three parcels each time and the commission they earn is about four folds comparing to the traditional couriers. High commission guarantees the quality. Our point-to-point delivery also eliminate the time wasted in distribution centre and speed up the delivery process.

From the standpoint of users, we enable the ultimate customer experience. Users can choose the pick-up time and the delivery time according to their desires. This is not plausible for traditional couriers to deliver at a particular time. This can greatly increase the successful rate of first-time delivery and reduce the burden of sellers to follow up unsuccessful deliveries.

Market Strategies

Target customer

Our service is a P2P platform providing crowdsourced same-day delivery service. It includes both couriers and customer.

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Our target couriers are all the citizens who want to earn extra income by delivering things for people in the community. That means no matter what the occupation of the couriers is, he/she can still apply to join our team.

Based on the statistics given by the government, the numbers of 2.5G and 3G/4G mobile subscribers in Hong Kong are 12,323,114. Therefore, the potential number of couriers in Hong Kong are over than 5 million based on the research from the Japanese media that each person own more than two mobiles with data usages.

Our target customers are all the people who need to deliver their stuff immediately or on the same day. In the first year, we mainly target individual customers. After that, cooperation with business clients and provision of customized services would be our main focus. It is welcome for restaurants, offices or individuals to place an order on our platform.

Market positioning

We position ourselves as a specialist of same-day delivery. Traditional couriers such as S.F. Express, Morning Express claim that they can provide the same day domestic service if the order is placed in the morning. The service, however, is restricted to the commercial area and could not promise to deliver at specified time. Moreover, the cost is prohibitively high for normal users to request the couriers to deliver the parcels within two hours. Thus, the market is lacking a provider with flexible ordering time and places of delivery at this moment.

The service that we provide to customers is different from the vehicles-booking companies such as Gogovan and Uber. They merely connect registered vehicles with customers to provide point-to-point transportation services. We, in contrast, connect seven millions citizens to provide door-to-door delivery. The logistics network would be massive under this design. Also, our target couriers are all the citizens who want to earn extra money by choosing available deals that fit the routes of their journeys. This provides high flexibility to the users.

Hong Kong citizens are busy and delivery efficiency is of paramount importance. Our unique service could meet the high standard required at a reasonable price. We allow them to ‘set their own price’ and find someone to match with the offer. If urgent delivery is required, a higher price could be set to reduce the time for matching. This practice would be fair to the parties on both sides.

Therefore, we put our market positioning on the place that the customers can directly enjoy the customized same-day delivery service by having a few clicks on their phones. It is the most convenient way for them to deliver their parcel at a reasonable price.

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Market competition

Direct and indirect competitions can be faced from traditional couriers, in-house delivery teams and other logistics start-ups.

Traditional couriers like SF Express, DHL, Yamato and UC Express are the major market players in domestic delivery. The best logistics solution offered is next day delivery and extra working days need to be added for remote areas. The major hurdles for traditional couriers achieving same-day delivery are insufficient capacity and prohibitive cost. Current logistics model would be infeasible as minimum four to five hours are spent on assembling parcels in distribution centres before the first delivery attempt. Furthermore, couriers are assigned to deliver at multi-point and this lengthens the average time needed for a single delivery.

The largest market player providing domestic delivery service in Hong Kong is S.F. Express. It provides the same day delivery service if the customer make an order before 11:00am. But the delivery is limited to the industrial or commercial area in Hong Kong.

They would also provide the Two-Hours Express Delivery Service which ensures that the parcel can be delivered within two hours. But this service is only applicable to the 5kg or below parcel only. The traditional delivery companies have the brand advantage and better customer service and supporting. They have a clear step to show you how your parcel is transported from one place to others. However, the transit time cannot be guaranteed unless you pay more to arrange a special delivery.

What they can offer is insurance covered policies and continuous tracking for parcels. The sophisticated in-house built logistics system and professional images give confidence to businesses and consumers.

Normal Delivery:

Couriers Price ≤ 1 kg Price ≤ 3 kg Transit Time Additional chargeDHL** HKD24 HKD72 Before 1030 (major commercial

area)Before 945 (other areas covered), same day

New Territories:HKD25Remote area in Hong Kong Island:

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Others T+1 HKD25SF Express HKD22 HKD28 Before 1100, same day (B2B)

Others T+1Residential Area T+1-2

Residential Area : HKD30

UC Express***

HKD17 HKD37 Before 1300, same day (B2B)Others T+1Residential Area T+1-2

Residential Area :HKD30-150

** Only provides pickup service for DHL account’s holders

*** Needs to purchase a bundle of tickets for use

Express Delivery:

Couriers Price ≤ 1 kg Price ≤ 3 kg Transit Time Available to residential area

DHL - - Unavailable -SF Express HKD142 HKD148 Within two hours NoUC Express***

HKD77 HKD97 Within four hours HKD30-150

*** Needs to purchase a bundle of tickets for use and make pre-booking

An in-house delivery team refers to the courier hired by firms to deliver the products to end-users. This logistics solution provides high flexibilities for business to set out its delivery route and transit time can be easily controlled. Pressures, however, will be built when seasonal demands surge and operational efficiency can be easily compromised. Idle workforce, vice versa, will eat up the profit of the company. This deficiency restricts the flexibility of the firm and results in cost inefficiency.

Other logistics start-ups like Gogovan and Easyvan would be another party having a competition with us. These start-ups connect van drivers and users and want to make last-mile deliveries easier for users. The service can be availed to move furniture to new apartment in another area or to deliver weekly needs for a store to maintain stock levels. The start-up aims to be a one-size fits all solution. Customised logistics solution and vast base of drivers would be its key advantages.

The basic pricing model, however, only provides delivery from pick-up points to drop-off points. Pricing for door-to-door delivery is unclear and varies among drivers. Moreover, parcels are not covered by insurance under these platforms and tracking are not available for users. This could not give sufficient confidence to the clients for the safety of the parcels.

There is keen competition between these companies. They provide different benefits to the drivers and customers in order to increase the market share. It is unstoppable for them to

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spend more and more money. Besides, S.F. Express is going to establish the new app S.F. Car to enter into the market. Further market competition will be stirred up.

Point-to- Point Delivery:

Couriers Price Transit Time Door-to-door delivery

Additional charge

Logistics start-ups

Depends on the vehicle types and distance

Within two hours Additional charge: Need to negotiate with the drivers

Tunnel’s fee

Financial Plan

Sales Forecast

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Pricing of Service

C customers

C customers are the fundamental and the initial group of our customers who contribute 100% of our sales income in the first year. We, the platform of the transition of the goods, strongly believe that the price should be fully determined by the market. Therefore, at the beginning of our business start-up, we only provide the suggested prices determined by the market price of those express delivery services in Hong Kong as references for the customers to set up their market price. After the collection of sufficient sales data, we will provide the market price of different goods in different weights by ourselves in order that the market prices would be more accurate.

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Sales Forecast Table

Year 1 Year 2 Year3

(HKD$) (HKD$) (HKD$)

Sales

- C Customers 1,458,000 6,804,000 8,165,000

- B Customers - 6,000,000 12,000,000

Total Sales 1,458,000 12,804,000 20,165,000

Cost of goods sold

C Customers Written Off 1,458,000 6,804,000 7,349,000

B Customers Written Off 4,800,000 9,600,000

1,458,000 11,604,000 16,949,000

Gross Profit - 1,200,000 3,216,000

Gross Profit Ratio 0% 9% 16%

Income Generation Plan

First Six Months

We will not generate any income in the first six month of our business because we are still in the stage of apps developing. The service has not yet launched in the market.

Next Six Months - No Commission Charged

At the first year of our business, we intended not to charge any commission from all couriers in order to attract more people to join us as couriers and promote our brand name. We think that this new and innovative idea in conjunction with our efficient marketing and promotion plan can catch customers’ and general public’s eyes which lead to a dramatic start of our business.

Second Year - B customers

After our business gets on track, the accumulation of sufficient C customers and couriers, we will diversify our income source by expanding our business to B customers. We majorly target on retailing and e-commence business and we provide the platform for those

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companies to deliver the goods to their customers in a more efficient way. We will charge a certain percentage of their income generated through our platform. Therefore, starting from second year of our business, we change our customer target from C to B in order to expand our business further more.

Third Year - 10% Commission Charged

After our business gets on track, the accumulation of sufficient C customers and couriers, expect in the first season of the second year, we will charge 10% of each transaction as commission or service charged in order to cover our losses in the first year. However, the exact timing and the percentage charged can be changed according to the actual situation.

Budget

Budget Table

Year 1 Year 2 Year 3

(HKD$) (HKD$) (HKD$)

Rent 36,000 54,000 96,000

Marketing & Promotion 80,000 240,000 360,000

Salary - 396,000 972,000

Utility 16,000 36,000 48,000

Starting Expense 5,000 - -

Insurance 1,500 3,000 3,000

Apps Development Expenses Written Off 12,000 24,000 24,000

Fixed Assets - Depreciation 8,000 12,000 12,000

Total Expense 158,500 765,000 1,515,000

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Operating Cost Incurred

First Four Months - Apps Developing

In the first four months of our business, it is the stage of preparation and apps development. We will invite another partner whose major work is to focus on application development.

Next Six Months - Preparation of Launching

We will move into the office to prepare the launch of the business, for example, the testing of the apps, the promotion of our services through internet, the testing of our operation flow and so on. Therefore, it incurs cost of rental, marketing, utility etc.

Second Year – Focusing on business clients

After the shifting of the focus from individuals to businesses, we have to spend extra costs in marketing and promotion. The expansion of our business bring us extra pressure which leads to the hiring of two extra colleagues and the additional cost of utility.

Third Year - Getting On Track

After our business gets on track, we need extra 3 to 4 colleagues as well to maintain the service quality and system stability. In addition, the expansion of our business and the increase in number of colleagues leads to the insufficient working place. Therefore, the renting of a bigger office causes an extra cost as well. More capital should also be invested in marketing in order to attract more B customers.

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Profit / Loss

Gross Profit - 1,200,000 3,216,000

Gross Profit Ratio - 9% 16%

Net Profit (Loss) (158,500) 435,000 1,701,000

Net Profit (Loss) Ratio (11%) 4.58% 8.44%

Despite the fact that the net loss in the first year seems very huge, it composes hugely the cost of development of the apps since the application should be a huge asset for us. More importantly, this investment cost will be further covered by the profits in two years after. Therefore, it is a worthy investment plan.

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Means of Capital

First Year / Beginning Of The Business

At the beginning of the business, we have to spend over $100,000 in application development and purchasing assets. There are two major sources of our capital. The first one is our saving. We, three persons graduated less than a year, lack of sufficient saving to start our business. We have some tens of thousands of Hong Kong dollars which may be sufficient to make our own application; but sadly, it is not enough to support our further operation.

Therefore, we strongly rely on the second means of capital - Funding from operations. We will apply for funding no matter from government, private companies, non-profit organizations in order that we can obtain sufficient allowances, technical supports, professional advices and so on to lead to a stronger start of our business.

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Second Year Or After

In order to maintain a high competitiveness in the market, we look for an investor who is interested in investing and supporting our business. We look for more capital because it can maintain a high liquidity situation of our business to avoid risks from market turmoil that we can take a faster reaction if we have sufficient capital. In additional, the capital and technical support from investors can lead to an upgrade of our services provided to improve our competitiveness.

In case of no allowance and investment

In case there are no allowances or investments from parties or companies, our main target is to come through the difficult situation, such as confronting a negative cash flow situation in the first year. However, after first year, after the successful cooperation with business clients, the financial situation will improve progressively.

Projected Cash Flow Statement

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Year 1 Year 2 Year 3

($HKD) ($HKD) ($HKD)

Operation

Net Profit (Loss) ($158,500) $435,000 $1,305,000

Depreciation or Amortization $20,000 $36,000 $36,000

Net Cash Flow from Operations ($138,500) $471,000 $1,341,000

Investing and Financing

Assets Purchased ($40,000) $0 $0

Application Development ($70,000) $0 $0

Net Cash Flow from Investing and Financing

($110,000) $0 $0

Cash at the Beginning of Period $90,000 ($158,500) $312,500

Cash at the End of Period ($158,500) $312,500 $1,653,500

Projected Balance Sheet

As of Period's End Year 1 Year 2 Year 3

($HKD) ($HKD) ($HKD)

Current Assets

Cash ($158,500) $312,500 $2,049,500

Non-Current Assets $32,000 $20,000 $8,000

Application $58,000 $34,000 $10,000

Total Assets ($68,500) $366,500 $2,067,500

Retained Earning $90,000 ($68,500) $366,500

Net Profit (Loss) ($158,500) $435,000 $1,701,000

Total Liabilities and Equility ($68,500) $366,500 $2,067,500

Marketing and Promotion

Channel / location of providing your product / service

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Similar to other P2P platform, people can enjoy the service by entering their information of arrival and parcel in the apps. People will be able to download the free mobile app on App Store in IOS and on Google Play in Android. Once they download the apps, they can make an order directly. They can also take some orders which are on their way to somewhere to earn some easy money. That means you can enjoy the delivery service no matter where you are in Hong Kong if you have a smartphone with our apps.

Scale of business

The cost is not a huge amount at the beginning of our business. The customer target is limited to C2C so the scale is small at the very beginning. And we do not have a profit-generating model in the first year because we focus on enlarging our delivery network and hope that there will be totally over 20,000 active couriers after one year. Searching for medium-sized business client would be our focus to build up our business model in the second year. We hope that our business will have over $10,000,000 sales volume and aim to have the scale as big as Gogovan. The growth of scale of business will depend on the investment from other companies and we are confident to say that our business will have a promising future.

Promotion

We do not have a great amount of capital to support our promotion. We mainly emphasise online promotion and road shows which minimize our spending.

i. FacebookAccording to the statistics of the Facebook, Hong Kong has 4.4 million Facebook users. That translates to a penetration rate of 63 percent, or 4.4 million people out of a population of 7million.It is the most direct way to connect with most of the Hong Kong people. We would post different kinds of information such as the activity of HKRush and also the process of our start-up. We hope to catch the eyes of both the people needing our service and teenagers who like innovation and our start-up story.

ii. Forum-seedingWe would post something about HKRush at the fourm such as HKDiscuss, Uwants, BabyKindom. We would take advantage of discussions on forums to do promotional penetration. Our objective is to increase public awareness. Most of the people after using

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HKRush will find more information about our service. We can grasp the opportunity to build up our brand image and increase the number of customers.

iii. Road ShowSince we need to involve more citizens to enlarge our logistic network, we need to do the road show in some urban district such as Mong Kok, Causeway Bay. We can pass the message to the citizens directly. We will focus on the promotion of the application to the couriers in order to enlarge our delivery network as fast as possible. And also we can teach them how to use our apps to take or start an order.

iv. Media interview/ReportWe hope that HKRush can get some interviews from the media such as bloggers, magazines and radios. It will greatly boost our popularity and arouse social discussions. Apple Daily is our primary choice because it has the largest reader coverage rate in Hong Kong and the news on the nextmedia apps always become one of the hottest topic. We would adopt this method if the cost is within our budget.

Organization Chart

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HKRush, at the beginning of the business operated in partnership with equal shares of each of the partner, is divided into four major departments, each of which is led by one of the partners who are responsible of separate works in operation & finance, marketing & sales, business development and Internet Technology. However, in gathering ideas and making serious decisions, we will discuss together to gain ideas on the route of the main direction of the company.

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William Operation & Finance

TimMarketing & Sales

StormyBusiness Development

VacantInternet Technology