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- 2. 000000000040000002d010000040000002d0100001c000000f b02f3ff0000000000009001000000000440002243616c696272 69000000000000000000000000000000000000000000000000 00040000002d010100040000002d010100040000002d010100 0400000002010100050000000902000000020d000000320a0c 0000000100040000000000ea012203204d0800040000002d01 0000040000002d010000030000000000
- 3. -3- Executive synopsis Safe has designed a new product that provides managers with a quick, easy, and affordable method to effectively monitor employee hand washing. Proper hand washing is the most effective preventative measure available to combat communicable diseases. Studies have shown that proper hand washing procedures in these environments could cut down the spread of disease by up to 75%. The greatest contributing factor to this problem stems from the inability of supervisors to monitor and control employee hand washing. Existing products offer no effective or affordable solutions for enforcing and ensuring hand washing compliance. Mission Our mission is to create value for customers and shareholders by continually improving health and reducing preventable illnesses through the use of our soap. Keys to Success * A branding campaign to build awareness of SAFEs products as the standard for ensuring hand washing compliance. * Patent protection to defend our time-sensitive dye and product concept from competitors. * Complementary relationships with organizations interested in increasing hand washing compliance. Objectives * Develop a complete prototype which meets regulatory standards * Become the specialty soap of choice for day cares * .establish a strong brand image early to position ourselves in the market
- 4. Company Summary SAFE, IS created as a Limited Liability Corporation. SAFE develops and markets soaps utilizing time-sensitive dyes promoting sanitary and safe environments to businesses and parents interested in maximizing cleanliness. The company will initially be based out of a residential apartment in AHMEDABAD. Company Locations and Facilities The management team of SAFE will initially use a residential apartment to run operations.we will move to a rented office. Distribution will remain outsourced. Products SAFE product line provides a unique control level to managers, supervisors and parents alike. We have two basic product lines: CHILDSAFE, intended for day care facilities, and an antimicrobial-based product for hospitals (HEALTHSAFE) and restaurants (FOODSAFE) - the antibacterial products are not yet in development. The various product lines, competitors and future product possibilities for SAFE, will be outlined in the following section.
- 5. -5- Product Description * SAFE will produce a line of institutional liquid soaps with a time- sensitive dye blended into the mixture. * The dye reacts with the hands during the lathering process, staining the hands a distinct color, then fading in under six minutes. * The product will sell for approximately (rs38/case.) * The packaging will be compatible with existing soap dispensers mounted in washing stations and be available in a variety of sizes. * Initially, SAFE will produce products with child care acquirers in mind, utilizing the brightest colors possible. This product line, called CHILDsafe, will consist of four colors: red, blue, pink and green.
- 6. Competitive Comparison * SAFE products offer a high value alternative to other hand washing compliance products. * They provide an unprecedented level of control, allowing these managers to monitor and follow hand washing frequency and habits of both child-care workers and children. Ultimately this can lower costs for all users, either in a workplace or private environment . * As the first fading dye hand soap in the market, SAFE, will build brand identity, establishing the company as the standard for improving hand washing compliance. * As SAFE products become more familiar in a workplace environment, the product will begin to produce a pressure on employees, whereby they feel compelled to wash their hands out of a consciousness about the perception of all employees, not just managers. This "peer pressure" effect will further fuel the use of our products and the recognition of the benefits they deliver.
- 7. -7- Sales Literature In order to sell our product while creating familiarity and a positive brand image, it will be necessary to develop brochures and literature to emphasize the safety and beneficial attributes of fading dye soap, many of which may not be readily apparent to an interested party. These will be delivered both in person during a sales presentation and by direct mail. Sourcing The key to our success is the time-sensitive dye. Once the proper ratio of dye to base soap is isolated, the fragmented nature of the soap industry provides many options for outsourcing production. Similar to any commodity, economies of scale require the soap to be produced, packaged and distributed in large batches. Initially, the soap base will be purchased in quantities of at least 38,000 gallons for approximately rs50,000. Once the relationship with the manufacturer is established, our subsequent purchases will be approximately forrs20,000. These inventory amounts should be sufficient to for SAFE to meet the customer demand. Utilizing his production and distribution knowledge, Rick Brown will use existing established relationships in the industry to help us mix, package and distribute the product line.
- 8. Technology The technology of our fading dyes will be pivotal in the success of our company. The interactions between fading dyes and antibacterial or anti-microbial bases suitable for use in restaurants or hospitals are more complicated than the interactions with the glycerin or lotion soaps utilized in the CHILD line. Safe employee a professional chemist with experience developing dye products to further the research into technological innovations that may produce antibacterial and anti-microbial versions of the soap to address additional markets. Future Products Additional soap products, manufactured to comply with regulatory minimums for strength and effectiveness in their respective target markets will be developed to address restaurants and hospitals. These soaps will be trade marked under the names FOOD and HEALTH, respectively. Perhaps the most promising future market opportunity for fading dye soap is the retail market. This product line will include soaps using the same or similar dye colors as the day care to encourage children to wash their hands more often at home. This will be a top priority when the company develops the financial resources enough to mount a national advertising campaign and distribution system. A complete line of fading dye products could potentially be developed, including floor, counter and body cleaning products that use fading dyes to indicate places on a surface that may not have been cleaned.
- 9. -9- Market Analysis Summary There is tremendous potential for a product that provides supervisors and parents with the control to monitor and encourage hand washing. Considering the large scope of our potential markets, we feel it is imperative to focus our limited resources on a particular geographic region where we can establish demand for our product. After successful market penetration, we will begin implementation into the restaurant and hospital markets. Market SegmentationIndustry Analysis The Industrial and Institutional soap industry, of which we are a part, is quite fragmented, but contains several well known main competitors: dettol safeguard savlon medimix lifebuoyโthere is fierce competition for market share among the existing popular soap offerings, leading to lean profits on soap sales. Distribution Patterns Distribution in the soap industry is provided by regional providers. These distribution companies usually serve a large portion of the market based on the respective size of the market, delivering to the organizations monthly or bi-monthly depending on demand and usage patterns. Food services typically receive deliveries of cleaning products once a month. Hospitals typically have a distribution system that operates on monthly deliveries o large quantities. Restaurants typically have a weekly delivery schedule. SAFE first product line addresses the day care market. There are currently 200 day carecenters inMetro area. After successful implementation insaurashtra, we will begin expansion into the gujrat regionn . Successful penetration into the day care market will be followed by implementation into the restaurant and hospital markets.
- 10. Industry Participants The soap industry is highly fragmented. There are more than forty different Institutional soap products that compete in the market. Target Market Segment Strategy Our initial day care market will consist of medium to large day care organizations, consisting of twenty children. Organizations of this type are attractive because they are well managed, successful, health conscious and nationwide. Within these organizations we will target decision level managers with the power to implement use of our product in those locations. Market Needs According to a study published in the medical journal, Infectious Diseases in Children, researchers in hand washing recovered fecal coli forms from the hands of one out of every five staff members, citing that more than 33% of day care facilities "had poor hand washing techniques and no policy for hand washing before eating or after playing outside. In spite of all the studies about the benefits of hand washing, improper or infrequent hand washing continues to be a major factor in the spread of disease in day-cares." Hand washing in child care facilities is an ideal initial target market for several additional reasons: * Child care facilities have rampant illness and germ problems that can be directly reduced through frequent child and worker hand washing. * Child care facilities have strict, government mandated rules that require frequent hand washing. * Parents are particularly interested in reducing child illness, making them one of our strongest advocates for the use of CHILD in environments they cannot directly monitor.
- 11. - 11 - Market Growth The demand for child day care services will continue to grow. As the labor force participation of women between the ages of 16 and 44 remains high, parents of preschool and school-age children are expected to seek more day care arrangements. As parents continue to work during weekends, evenings, and late nights, the demand will grow significantly for child day care programs that can provide care during nontraditional hours. School-age children, who generally require child day care only before and after school, increasingly are being cared for in child care centers Target Market Segment Strategy Our initial day care market will consist of medium to large day care organizations, consisting of twenty or more children. Within these organizations we will target decision level managers with the power to implement use of our product in those locations
- 12. Marketing Strategy For our initial target market of day care facilities, the company will implement two parallel marketing efforts, aimed respectively at day care facility decision makers, and the parents of young children who use these facilities. We will create a push factor by effectively convincing the decision-level managers within the organizations that our product provides an ideal solution to the hand washing compliance. A "first to mind" branding campaign will build CHILD as the leader in increasing hand washing compliance. Significant parental support will encourage organizations to implement CHILD in environments involving their children. Positioning Statement CHILD is valuable to day care managers who need effective control solutions to ensure frequent child and child-care worker hand washing to keep the environment clean and to minimize preventable illness. No other product on the market serves the hand washing compliance aspect of workplace safety with such an affordable, direct and complete solution. Unlike traditional soaps, our product provides conclusive evidence every time an employee washes his or her hands for only a marginally higher cost than traditional soaps, and significantly less than gloves or other hand washing compliance systems. Pricing Strategy Retail pricing for CHILD will generally be around $90/case for four gallons and will command a 25-30% price premium over conventional liquid soaps. The value of our product will not be attractive to extremely price sensitive customers. The market for soap is generally inelastic, but our product offers significant differentiating benefits over current soaps that justify the price difference.
- 13. - 13 - Promotion Strategy One of the most important aspects of a successful launch is positive publicity for our product. We will develop an awareness campaign to promote our product through several avenues. Our management team will fiercely pursue positive public perception through government endorsements promoting the benefits of our products. We will also attempt to capitalize on the novelty of the solutions provided by our product by actively seeking local news and media coverage to help spread awareness. Buzz will be developed in social hubs by distributing samples to parties with potential interest. Parental support of the product will be garnered through free trials, demonstrations, and direct mailings to the day care At washing stations in client facilities we will spread awareness with stickers targeted towards children, showing them the process of washing to turn their hands different colors and emphasizing how fun it can be. Pamphlets will be sent to the family homes through the day care roster mailing lists, to calm fears regarding a new product in their child's environment, explain the benefits and encourage the parents to respond and build feedback for the benefits of the product to further increase implementation Distribution Strategy Our initial distribution strategy will involve a combination of distributor and direct sales. Relationships with local distributors will be established to increase promotional reach and potential users. The first orders will be available immediately through direct delivery by our executive team. Outsourcing distribution entirely in the future will allow SAFE to focus its efforts on marketing and expanding as quickly as possible. Distributors will pay for the inventory up-front, and although this cuts our profit margins it helps SAFE to maintain a more flexible structure. distribution will be entirely outsourced to distribution companies, and direct deliveries from the executive team will cease.
- 14. Marketing Programs Our most important marketing program is our branding program, aimed initially at regional chain and franchise managers. This program is intended to penetrate the target markets, and establish SAFEa products as the soap of choice. Achievement should be measured against our projected 45% monthly sales growth rate for the first year. Emphasizing the risks associated with hand washing non-compliance, our marketing program will employ the fear of disease, costs of illness and government regulations extensively. Written materials will convey urgency, connect users to the underlying problem and suggest SAFE products as the optimal solution to the problem
- 15. - 15 - Sales Strategy Sales strategy will initially address local and regional managers with ordering authority for the establishments in that area. The prospective clients will be supplied with a professional product information packet and moved into the sales funnel to begin closing prospect, followed up with a direct mail brochure and a phone call. There will be no initial direct compensation or commission for closed sales. Proceeds from sales will be invested back into developing and expanding the business. As the company begins to increase its initial sales force, commission- based incentive programs will be implemented.
- 16. Sales Forecast โขIf we are able to distribute our product through existing distributors, it will provide us a significant financial advantage, as well as the ability to meet the quick increase in demand for our product. โขBeginning with an initial monthly sale of rs1,250 for our day care soap product (CHILD), we predict sales will increase by 45% per month for the first year. We then calculate a growth rate of 90% yearly. Cost of Goods Sold is approximately 47% of sales. However, COGS grows at a yearly rate of 88%, which is less than the sales growth rate in order to represent the economies of scale that we hope to achieve as our operations grows
- 17. - 17 - Web Plan Summary Our website will be available as a resource to customers and interested parties. It will include statistics, surveys and articles to build awareness about the need for and benefits of our product. The website will provide interested parties with a way to contact our company for answers to any questions they may have, and will include information on ordering and locating the product. Our product will not be directly available online, but we will build positive perception and awareness about our product there through statistics and user testimonials demonstrating our value. We will include the URL in all printed materials, and encourage distributors to link to our site. Because the audience for SAFEaproducts is fairly specialized, the most efficient means for marketing the site will be working specifically with the intended customers and pointing them to the site. The site will be registered with search engines., After the initial implementation of the site will also be used as a resource to promote our other fading dye products as they are developed. The website will then be converted into a multiple product site, perhaps expanding its offering to include direct ordering
- 18. Management Summary Two of our strengths are the low cost structure and flexible personnel needs. Sales people with experience relevant to each new respective target market can be attained as need dictates, but the initial management team consists of the founders themselves, with little operational support. The Board of Advisors will be a critical foundation for the successful growth and development of SAFE Management Team Initially, both founders will share in the operational and financial responsibilities of the company. They will be responsible for finding, attaining and managing new accounts. Both founders will be responsible for making direct sales, marketing, and all other operational tasks involved with making this company successful. The CEO will oversee all company decisions
- 19. - 19 - Management Team Gaps It will be necessary to hire new sales associates as we expand into each new market segment. A child-care industry professional with relevant experience and networks in the industry will be acquired to accelerate sales growth. After sufficient cash flow has been established and revenues have plateaued, we will hire a chemist on salary to expand our existing product line. A chemical expert working as a consultant will initially be useful for three reasons: โขAiding in the research and creation of a safe initial prototype. โขTroubleshooting problems with our product and answering customer questions and concerns about SAFE products as they arise. โขFurther developing the product for future target markets
- 20. Key Financial Indicators Sales - Our sales are projected to grow at a consistent rate of 90% yearly, and we believe this accurately reflects the realistic growth our product would be capable of attaining if we can properly utilize existing channels of distribution and gain social acceptance. Gross Margin - As we grow, become more efficient, and gain economies of scale we begin to see a slight growth in our margins. Operating Expenses - we see an increase in the number of operating expenses that we will incur. We begin incurring larger costs involving advertising, promotion, marketing, and payroll expenses. Inventory Turnover - We will begin operations with a preliminary purchase of rs50,000/ 38,000 gallons of soap. Our preliminary forecast suggests that for us to be flexible in meeting customer demand we will need to maintain a minimal inventory stock at a rented warehouse. We estimate that, on average, we will keep two weeks worth of inventory on hand. Collection days - We will collect our accounts receivable on an average of 45 days. we will have the cash to cover unexpected costs or expenses so that we may decide to allow a longer collection period.
- 21. - 21 -
- 22. Break-even Analysis The following fixed costs reflect the relative costs for selling and distributing our product within the greater Portland metro area, and do not reflect the fixed costs necessary to expand further.
- 23. - 23 - Pro Forma Cash Flow Year 1 Year 2 Year 3 Cash Received Cash from Operations Cash Sales Rs0 rs0 Rs0 Cash from Receivables Rs138,736 Rs362,031 Rs687,858 Subtotal Cash from Operations Rs138,736 Rs362,031 rs687,858 Additional Cash Received Sales Tax, VAT, HST/GST Received rs0 rs0 Rs0 New Current Borrowing Rs0 rs0 rs50,000 New Other Liabilities (interest-free) rs0 rs0 Rs0 New Long-term Liabilities Rs0 rs0 rs0 Sales of Other Current Assets Rs0 rs0 Rs0 Sales of Long-term Assets Rs0 rs0 rs0 New Investment Received Rs0 rs0 Rs0 Subtotal Cash Received Rs138,736 rs362,031 rs737,858
- 24. Expenditures Year 1 Year 2 Year 3 Expenditures from Operations Cash Spending rs57,600 rs144,000 Rs216,000 Bill Payments Rs128,381 rs215,710 rs438,395 Subtotal Spent on Operations Rs185,981 rs359,710 Rs654,395 Additional Cash Spent Sales Tax, VAT, HST/GST Paid Out Rs0 rs0 rs0 Principal Repayment of Current Borrowing $0 $0 $0 Other Liabilities Principal Repayment rs0 rs0 Rs0 Long-term Liabilities Principal Repayment Rs0 rs0 rs0 Purchase Other Current Assets rs0 rs0 Rs0 Purchase Long-term Assets Rs0 rs0 Rs0 Dividends rs0 rs0 Rs0 Subtotal Cash Spent Rs185,981 rs359,710 rrs654,395 Net Cash Flow (rs47,245) rs2,320 Rs83,463 Cash Balance Rs29,455 rs31,775 rs115,239
- 25. - 25 - Projected Profit and Loss Our profit and loss projections reflect our expectation that monthly fixed costs will remain constant over the course of the first year. Cost of goods sold increases at a decreasing rate, as economies of scale make soap production cheaper per unit as production volume increases. Based on these projections the company will become profitable. Advertising expenses will remain steady during our first year of operations. However, Advertising and Promotion will grow in to reflect the purchase of print ads, PR brochures, and additional promotional content.
- 26. Pro Forma Profit and Loss
- 27. - 27 - Year 1 Year 2 Year 3 Sales Rs237,168 rs450,620 rs856,177 Direct Cost of Sales Rs94,867 rs178,351 Rs321,031 Other Rs0 rs0 rs0 Total Cost of Sales Rs94,867 rs178,351 Rs321,031 Gross Margin Rs142,301 rs272,269 rs535,146 Gross Margin % 60.00% 60.42% 62.50% Expenses Payroll Rs57,600 rs144,000 Rs216,000 Payroll Taxes Rs0 rs0 rs0 Depreciation rs0 rs0 Rs0 Rent Rs8,400 rs8,400 rs8,400 Utilities rsr1,200 rs1,200 Rs1,500 Insurance Rs6,000 rs6,000 rs6,000 Telecommunications rs1,200 Rs2,500 Rs3,500 Travel Rsr1,800 Rs2,500 Rs4,000 Warehousing Rs3,600 rs4,000 Rs4,500 Other General and Administrative Expenses Rs1,200 rs1,200 Rs1,200 Total Operating Expenses rs81,000 rs69,800 Rs245,100 Profit Before Interest and Taxes Rs61,301 rs102,469 rs290,046 EBITDA rs61,301 rs102,469 Rs290,046
- 28. Interest Expense Rs0 rs0 rs2,500 Taxes Incurred rs18,390 rs30,741 Rs86,264 Net Profit rs42,911 rs71,728 rs201,282 Net Profit/Sales 18.09% 15.92% 23.51%
- 29. - 29 - Projected Balance Sheet Once we have established a relationship with the manufacturer, we will purchase inventory in minimum quantities of approximately 15,000 gallons for approximately rs20,000 per shipment (following the initial start-up inventory purchase, at rs50,000). As sales increase we expect that inventory turnover rate to increase. Our only significant Accounts Payable will be Inventory, which are a direct reflection of the level of inventory on hand. We will be paying off our Accounts Payable in accordance with sale of inventory. Therefore, as we begin to sell more soap, we will be increasingly capable of meeting our obligations in a more timely manner, ensuring that we have enough cash on hand to cover our short term liabilities.
- 30. Pro Forma Balance Sheet Year 1 Year 2 Year 3 Assets Current Assets Cash Rs29,455 rs31,775 Rs115,239 Accounts Receivable Rs98,432 Rs187,021 rs355,340 Inventory Rs119,146 rs34,927 Rs60,193 Other Current Assets Rs0 Rs0 rs0 Total Current Assets Rs247,032 rs253,723 Rs530,772 Long-term Assets Long-term Assets Rs0 rs0 Rs0 Accumulated Depreciation Rs0 Rs0 rs0 Total Long-term Assets Rs0 rs0 Rs0 Total Assets Rs247,032 Rs253,723 rs530,772 Liabilities and Capital Year 1 Year 2 Year 3 Current Liabilities Accounts Payable Rs77,422 rs12,384 Rs38,150 Current Borrowing Rs0 Rs0 rs50,000 Other Current Liabilities Rs0 rs0 Rs0 Subtotal Current Liabilities Rs77,422 Rs12,384 rs88,150 Long-term Liabilities Rs0 rs0 Rs0
- 31. - 31 - Total Liabilities Rs77,422 Rs12,384 rs88,150 Paid-in Capital Rs250,000 rs250,000 Rs250,000 Retained Earnings (rs123,300) (rs80,389) (rs8,661) Earnings Rs42,911 rs71,728 Rs201,282 Total Capital Rs169,611 Rs241,339 rs442,621 Total Liabilities and Capital Rs247,032 rs253,723 Rs530,772 Net Worth Rs169,611 Rs241,339 rs442,621
- 32. Business Ratios The following table compares our ratios with standard ones from the soap and detergents industry. Our current and quick ratios are much higher than industry averages. This is due in part to the substantial difference between our assets compared to our liabilities. Considering that we will be able to avoid any large loans and fund the company almost entirely independent of commercial creditors, there will necessarily be a discrepancy between our fairly large assets compared to our considerably smaller liabilities. Our business model and truly unique product allows us to outsource the manufacturing of the product, since our added value comes in the soon to be patented dye/soap formula. So, unlike other commercial-use soap makers in our industry, we do not need to purchase major capital assets, funded by loans.
- 33. - 33 - Ratio Analysis Industry Year 1 Year 2 Year 3 Profile Sales Growth n.a. 90.00% 90.00% -2.19% Percent of Total Assets Accounts Receivable 39.85% 73.71% 66.95% 29.49% Inventory 48.23% 13.77% 11.34% 23.24% Other Current Assets 0.00% 0.00% 0.00% 21.00% Total Current Assets 100.00% 100.00% 100.00% 73.73% Long-term Assets 0.00% 0.00% 0.00% 26.27% Total Assets 100.00% 100.00% 100.00% 100.00% Current Liabilities 31.34% 4.88% 16.61% 34.96% Long-term Liabilities 0.00% 0.00% 0.00% 8.33% Total Liabilities 31.34% 4.88% 16.61% 43.29% Net Worth 68.66% 95.12% 83.39% 56.71% Percent of Sales Sales 100.00% 100.00% 100.00% 100.00% Gross Margin 60.00% 60.42% 62.50% 33.85% Selling, General & Administrative 27.20% 24.35% 26.33% 26.71% Expenses
- 34. Advertising Expenses 7.08% 5.33% 4.09% 0.73% Profit Before Interest and Taxes 25.85% 22.74% 33.88% 0.81% Main Ratios Current 3.19 20.49 6.02 1.78 Quick 1.65 17.67 5.34 1.06 Total Debt to Total Assets 31.34% 4.88% 16.61% 46.64% Pre-tax Return on Net Worth 36.14% 42.46% 64.96% 1.89% Pre-tax Return on Assets 24.81% 40.39% 54.18% 3.54% Additional Ratios Year 1 Year 2 Year 3 Net Profit Margin 18.09% 15.92% 23.51% n.a Return on Equity 25.30% 29.72% 45.48% n.a Activity Ratios Accounts Receivable Turnover 2.41 2.41 2.41 n.a Collection Days 40 116 116 n.a Inventory Turnover 1.78 2.32 6.75 n.a Accounts Payable Turnover 2.66 12.17 12.17 n.a Payment Days 27 109 20 n.a Total Asset Turnover 0.96 1.78 1.61 n.a Debt Ratios Debt to Net Worth 0.46 0.05 0.20 n.a Current Liab. to Liab. 1.00 1.00 1.00 n.a
- 35. - 35 - Liquidity Ratios Net Working Capital rs169,611 rs241,339 rs442,621 n.a Interest Coverage 0.00 0.00 116.02 n.a Additional Ratios Assets to Sales 1.04 0.56 0.62 n.a Current Debt/Total Assets 31% 5% 17% n.a Acid Test 0.38 2.57 1.31 n.a Sales/Net Worth 1.40 1.87 1.93 n.a Dividend Payout 0.00 0.00 0.00 n.a