Life Protect Business Plan Financial Section by Don Tatum

Running head: GERMICIDAL AGENT 1

Germicidal Agent on Personal Protective Equipment Group Project

Randy Brienza, Linda Bueno, Cynthia Gensamer,

David Liebermann, Rachel Karash, and Donald Tatum

Malone University

Marketing Management

Dr. Marjorie Carlson Hurst

November 30, 2014

GERMICIDAL AGENT ON PERSONAL PROTECTIVE EQUIPMENT

Table of Contents

Executive Summary Page 5

Situational Analysis Page 6

Market Needs Page 6

The Market Page 7

Market Demographics Page 7

Market Trends Page 8

Market Growth Page 8

Microenvironment Page 9

The Company Page 9

Mission Page 10

Product Offering Page 10

Product Positioning Page 10

Swot Summary Page 10

Strengths Page 10

Weaknesses Page 11

Opportunities Page 11

Threats Page 11

Historical Results Page 11

Direct Competition Page 12

Indirect Competition Page 12


Porter’s Five Forces of Competition Page 13

Marketing Strategy Page 14

Value Proposition Page 14

Critical Issues Page 14

Financial Objectives Page 15

Marketing Objectives Page 15

Target Marketing Strategy Page 15

Messaging Page 16

Branding Page 16

Strategy Pyramids Page 16

Marketing Mix Page 19

Product Marketing Page 19

Pricing Page 20

Promotion Page 20

Advertising Page 20

Public Relations Page 21

Direct Marketing Page 21

Web Plan Page 22

Website Goals Page 23

Website Marketing Strategy Page 23

Development Requirements Page 24

Service Page 25

Implementation Schedule Page 26


Financials Page 28

Break-Even Analysis Page 29

Sales Forecast Page 30

Sales by Channel Page 31

Sales by Segmant Page 31

Sales by Region Page 31

Marketing Expense Forecast Page 31

Expenses by Sales Channel Page 32

General and Administrative Expense Budget Page 32

Expense by Region Page 33

Linking Expenses to Strategy and Tactics Page 33

Contribution Margin Page 33

Controls Page 34

Implementation Page 35

Keys to Success Page 35

Market Research Page 35

Contingency Planning Page 36

CRM Plans Page 37

References Page 38

Appendix Page 39


1.0 Executive Summary

LifeProtect is a new biomedical company that has introduced and launched advanced

personal protective equipment in Q4 of 2014. Through its own research and development,

LifeProtect introduced a dry germicidal agent that will be placed on the outside layering of the

Personal Protective Equipment (PPE). This proprietary agent has proven to kill germs and

bacteria on contact, and will assist in reducing the transmission and growth rate of infectious

diseases.

With a mission to serve and provide the highest degree of care to our healthcare industry,

as well as our military, LifeProtect offers varying bundles of masks, gowns, gloves, and shoe

coverings. Focused on highly concentrated geographic locations within the United States that

experience high rates of infection, this product will initially be offered through its new online

retail store. LifeProtect’s online retail store offers a simplified shopping-cart experience that will

allow consumers to take advantage of volume discounts at quantities at or above 250 units.

LifeProtect also understands the importance of exceptional customer service and the products

offered are 100% guaranteed, backed by a product liability insurance policy.

Targeting a total of 2,600 hospitals and military bases in 17 states, multiple channels will

be utilized to reach the target market. These channels include occupational health trade shows,

online advertisements, direct mail, medical publications, and public relations. Each form of

advertisement will provide rich information regarding the product, with trade shows and expos

allowing consumers to see, touch and try on the PPE offered.


Market research has indicated the growing rates of infections within hospitals and society

is subject to uncontrollable epidemics and pandemics. LifeProtect’s objectives are to curb

infections, protect the lives of caregivers and patients, as well as to reduce fear and instill peace.

LifeProtect has conducted a thorough financial analysis and has established metrics in

place to monitor its performance. A sound marketing and advertising strategy is in place and

financial goals have been established for the next three years. With a dedicated team of

professionals and desire to improve the lives of others, LifeProtect is 100% invested in the

product and service offered.

2.0 Situational Analysis

The medical industry, morticians, and the military experience high rates of infection every

day; therefore the market need is Personal Protective Equipment (PPE) with a chemical covering

that will kill infection on contact. This will further reduce the transfer rate of bacteria and

airborne particles. The Occupational Safety and Health Association (2003) defined PPE as

equipment worn to minimize exposure to a variety of hazards. Examples of PPE include such

items as gloves, foot and eye protection, protective hearing devices, hard hats, respirators, and

full body suits (“Personal Protective Equipment,” n.d.).

Understanding the market need, LifeProtect, a new company has emerged. LifeProtect

has developed and will launch a full-body protective suit with proprietary chemical. These

chemicals will fight and kill infection on contact. LifeProtect will offer their product directly to

those industries that battle with high infection rates on a daily basis.


5.0 Financials

LifeProtect, LLC commenced business operations during Q4 2014 on receipt of $575,000

unsecured loan, repayable over 7 years at 16% interest. LifeProtect leases 8,000 sq ft of

warehouse and office space in Hilliard, Ohio. LifeProtect has acquired inventory, fixtures,

communications technologies and materials management equipment to fulfil 2015 marketing,

sales and operational goals and has developed a 5 year infrastructure expansion plan to

accommodate forecasted growth.

During Q4 2014, LifeProtect’s six owners temporarily performed various business

activities including:

Recruiting and hiring of marketing, sales and operational leadership,

Website launch,

Supplier relationship development,

Oversight of facility enhancements, and

Brand development and targeted marketing refinements.

Owners also coordinated 2015 marketing campaigns as identified in Section 4.

The 2015 goal of LifeProtect’s marketing strategy is to become the supplier of choice to

hospitals and military bases that desire proven and reliable destruction of infectious bacteria that

comes into contact with personal protective equipment. Marketing and operations strategies are

grounded on superior performance in the following areas:

100% product satisfaction guarantee,

Creating and sustaining long-term, value-added relationships with all business partners,

In-stock availability of advertised products ready for same day shipping, and

Exceptional, customer engagement and service.


This section provides summarized financial details including break-even analyses, sales

and expense forecasts, and how these metrics link to marketing and operations strategies. Please

refer to appendix A, B and C to review Projected Income Statement, Balance Sheet and Cash

Flow Statements. Please refer to appendix D and E to review targeted customer channels by

region.

5.1 Break-Even Analyses

During 2015, hospital and military customers will purchase at least four PPE items per

sales transaction (such as: mask, gown, gloves and shoe covering) equaling an average sale of

$1600. During the 2015 start-up year, contracted bulk sourcing cost are calculated at $900 with

additional processing cost of $100 per sale (application of germicide) creating an average gross

sales margin of 37.50% and yielding a net profit margin of 16.73%. (Appendix A: Projected

Income Statement)

The break-even analysis below illustrates the sales volume and number of average sales

transactions LifeProtect must realize in 2015 to break even:

Total yearly Fixed Costs during 2015 equal $668,726 or about $55,727 monthly average:

Inventory and Processing (COGS) $277,143

Payroll $255,000

Capital Debt Payment (includes interest) $ 94,083

Rent $ 30,000

Utilities $ 12,500

Year Total $668,726

Thus, on average, monthly break-even sales in 2015 equal $90,557 ($55,727 * 1.625) or

about 57 sales orders, each month @ $1600 per order. Break-even analysis is rounded up to

account for bad debt allowance and for customers who take full advantage of LifeProtect’s


market penetrating financing terms of 2% net 15 days as well as 5% discounts for orders in

excess of $5,000.

LifeProtect has targeted 2600 hospitals in 17 states (Appendix D: Targeted Hospitals by

State) to meet sales goals. Totalize forecasted sales to military bases located within the 17

targeted states and surpassing the break-even goal is highly achievable.

5.2 Sales Forecast

As shown in Table 6, sales forecasts for 2015 through 2018 are broken down into two

major revenue streams: hospital sales and military sales. 2016 sales and thereafter include

consumer sales while sales in 2017 and thereafter include sales to higher education/research

institutions.

Growth rates in year over year sales are conservatively forecasted at 28% in 2016, 31% in

2017 and 17% in 2018. These projections are attainable as LifeProtect:

Stabilizes its market presence in the hospital and military channels,

Establishes brand superiority through product and service performance, and

Creates presence with early adopters in consumer and higher education/research markets.

Table 6

Sales Forecast

2014 2015 2016 2017 2018

Sales - Hospital 750,000 900,000 1,035,000 1,190,250

% to Year Total 75.0% 70.3% 61.8% 60.8%

Sales - Military 250,000 300,000 345,000 396,750

% to Year Total 25.0% 23.4% 20.6% 20.3%

Sales - Higher Education 200,000 250,000

% to Year Total 11.9% 12.8%

Sales - Consumer 80,000 96,000 120,000

% to Year Total 6.3% 5.7% 6.1%

Total Revenue from Sales $1,000,000 $1,280,000 $1,676,000 $1,957,000

Percent Increase 28% 31% 17%


5.2.1 Sales by Channel.

As shown in Table 6, during 2015, hospital sales account for 75% with military sales

accounting for the remainder. Starting in 2016, consumer sales will account for 6.3% of total

sales and in 2017, higher education/research sales will account for 11.9% of total sales.

5.2.2 Sales by Segment.

All sales in 2015 will transact through LifeProtect’s customer friendly website.

5.2.3 Sales by Region.

2015 marketing is targeted into sales regions apportioned geographically and only

include states with at least100 hospitals and/or states with aggregate hospital revenue in excess

of $50 Billion. (Appendix D: Targeted Hospitals by State) Strategies to geographically target

military bases through appropriated fiscal support will be of similar accord.

5.3 Marketing Expense Forecast

As shown in Table 7, 2015 marketing expenses are budgeted at 2.8% of total sales due to

initial web site development costs appropriated in 2014. 2016 website enhancements to support

growth and expansion strategies increase the marketing budget to 4.5% of total sales and once

enhancement costs are unencumbered, marketing expenses regress to near 4% of total sales in

2018. Expenses are tracked in the major marketing categories of general advertising, direct

marketing, publications, public relations, trade shows and web marketing/site management.


Table 7

Marketing Expense Budget

2014 2015 2016 2017 2018

Total Revenue from Sales 1,000,000$ 1,280,000$ 1,676,000$ 1,957,000$

Sales and Marketing Expenses

Advertising 7,500$ 10,500$ 12,500$ 15,000$

Direct Marketing 2,500$ 6,100$ 9,000$ 12,000$ 15,000$

Publications 3,500$ 7,000$ 14,000$ 17,500$

PR and Trade Shows 10,000$ 15,000$ 20,000$ 25,000$

Web Site 38,200$ 1,200$ 16,320$ 2,952$ 3,247$

Total Sales and Marketing Expense 40,700$ 28,300$ 57,820$ 61,452$ 75,747$

% Marketing to SalesRevenue 2.8% 4.5% 3.7% 3.9%

5.3.1 Expense by Sales Channel.

Marketing expenses are allocated across sales channel contribution as shown in Table 6.

5.3.2 General and Administrative Major Expense Budget.

As shown in Table 8, to achieve forecasted sales increases in the short to medium term,

while maintaining customer service and support for expanding customer portfolio, investments in

human assets, technologies, warehouse machinery and supply chain operations will be made.

Table 8

General and Administrative Major Expense Breakdown

2014 2015 2016 2017 2018

Staff Compensation 62,500$ 255,000$ 314,125$ 387,684$ 416,761$

Warehouse Machinery and Fixtures 150,000$ 25,000$ 100,000$

212,500$ 255,000$ 339,125$ 487,684$ 416,761$

% Change 20.0% 33.0% 43.8% -14.5%


5.3.3 Expense by Region.

Table 9 summarizes marketing and operational fiscal support percentages to total by

region. Percentage allocations are prorated based on number of hospitals and 2012 revenue

estimates for each region.

Table 9

Fiscal Allocation Support by Sales Region

Number

Region Hospitals

West Sub Total 820 31%

East Sub Total 546 23%

Central Sub Total 592 22%

South Sub Total 646 24%

Grand Total 2604

% Marketing

Funds Allocation

5.4 Linking Expenses to Strategy and Tactics

LifeProtect’s marketing expenses are allocated based on a prioritized approach:

Invest and allocate proportionally to penetrate hospital and military markets : 60%

Invest in brand and product awareness, build brand equity, create brand loyalty : 25%

Invest in prospective new markets: consumer and higher education/research : 15%

5.5 Contribution Margin

A key component of LifeProtect’s success in 2015 is to obtain 16.7% contribution

margin. Contribution margin is slightly compromised in 2016 and 2017 due to investments in

human assets, technologies, warehouse machinery and supply chain operations as sales and

customer support continue to expand. Thereafter, incremental improvements to contribution

margin will be realized through reducing certain fixed costs such as paying down/eliminating


capital debt while reducing variable costs associated with more favorable purchasing terms with

LifeProtect suppliers. Table 10 shows forecasted contribution margin goals through 2018

Table 10

Contribution Margin by Year

2015 2016 2017 2018

Total Revenue from Sales 1,000,000$ 1,280,000$ 1,676,000$ 1,957,000$

Cost of Goods Sold 277,143$ 314,057$ 453,333$ 544,310$

Interest Income Earned 7,606$ 9,828$ 17,155$ 18,106$

Gross Income or Gross Margin 730,463$ 975,771$ 1,239,822$ 1,430,796$

Gross Margin % 73.05% 76.23% 73.98% 73.11%

Total Sales and Marketing Expense 28,300$ 57,820$ 61,452$ 75,747$

Total General and Administrative Expense 419,477$ 584,446$ 792,429$ 807,555$

Federal, State, Local and Inventory Tax 115,356$ 160,723$ 217,918$ 222,078$

Net Income / Profit / Contribution Margin 167,330$ 172,782$ 168,024$ 325,417$

Contribution Margin / Sales 16.73% 13.50% 10.03% 16.63%

5.6 Summary

Through 2018, LifeProtect’s prudent financial management will produce organizationally

sustaining profit while exceeding customer expectations. Financial outcomes include:

At least 10% annual net profit and favourable cash flow through 2018,

Repayment of capital loan 1.5 years ahead of due date foregoing $21,000 in interest,

Starting a capital investment fund in 2016 with 2018 balance in excess of $210,000, and

Yearly cash payouts to LifeProtect’s 6 owners, excluding 2015.


Appendix A : Projected Income Statement

LifeProtect, LLC

Projected Income Statement

As of December 31, 2014 - December 31, 2016

2014 2015 2016 2017 2018

Income

Invested Capital "Uncle Joe"

$575,000

Sales - Hospital

750,000

900,000

1,035,000

1,190,250

Sales - Military

250,000

300,000

345,000

396,750

Sales - Higher Education

200,000

250,000

Sales - Consumer

80,000

96,000

120,000

Total Revenue from Sales $1,000,000 $1,280,000 $1,676,000 $1,957,000

Cost of Goods Sold

Inventory January 1

-

50,000

182,857

201,143

221,257

Purchases

50,000

400,000

448,000

586,600

684,950

Freight In

2,500

20,000

22,400

29,330

34,248

Inventory Processing

5,000

40,000

44,800

58,660

68,495

Total Inventory Handled

57,500

460,000

515,200

674,590

787,693

Less Inventory December 31

50,000

182,857

201,143

221,257

243,383

COGS

7,500

277,143

314,057

453,333

544,310

Gross Profit

567,500

722,857

965,943

1,222,667

1,412,690

Interest Income Earned

6,642

7,606

9,828

17,155

18,031

Total Gross Income

$574,142 $730,463 $975,771 $1,239,822 $1,430,721

Operating Expenses


Sales and Marketing

Advertising

7,500

10,500

12,500

15,000

Direct Marketing

2,500

6,100

9,000

12,000

15,000

Publications

3,500

7,000

14,000

17,500

PR and Trade Shows

10,000

15,000

20,000

25,000

Web Site

38,200

1,200

16,320

2,952

3,247

Total Sales and Marketing Expense $ 40,700 $28,300 $57,820 $61,452 $75,747

General and Administrative

Owner's Compensation

30,000

60,000

90,000

150,000

Staff Compensation

62,500

255,000

314,125

387,684

416,761

Rent

15,000

60,000

60,000

60,000

60,000

Warehouse Machinery and Fixtures

150,000

25,000

100,000

Insurance

7,500

30,000

30,000

37,500

37,500

Supplies, Furnishings and Office Equipment

5,000

10,000

15,000

25,000

30,000

Meals and Entertainment

2,500

5,000

8,000

11,000

14,000

Communications

1,250

10,000

17,500

21,000

25,000

Professional and Legal Fees

50,000

15,000

17,500

20,000

25,000

Utilities

3,000

12,500

13,000

13,000

22,500

Mileage Reimbursement

1,000

3,000

5,000

7,500

9,000

Other - Misc

3,000

6,000

6,000

6,000

6,000

Interest Expense

17,250

12,977

13,321

13,744

13,294

Total General and Administrative Expense

$348,000 $419,477 $584,446 $792,429 $809,055

Federal, State, Local and Inventory Tax $23,925 $115,356 $160,723 $217,918 $222,490

Net Income / Profit

$161,517 $167,330 $172,782 $168,024 $323,429

* Note: 2014 only includes Q4 Operations


Appendix B : Projected Balance Sheet

LifeProtect, LLC

Projected Income Statement

As of December 31, 2014 - December 31, 2018

2014 2015 2016 2017 2018

Assets

Current Assets

Cash & Liquid Assets

161,517

167,330

172,782

168,024

323,429

Accounts Receivable

166,667

213,333

279,333

326,167

Average EOM Inventory

50,000

182,857

201,143

221,257

243,383

Prepaid Expenses: Legal and

Insurance

14,375

11,250

11,875

14,375

15,625

Total Current Assets $ 225,892 $ 528,104 $ 599,133 $ 682,989 $908,604

Fixed Assets

Machinery and Equipment

150,000

150,000

175,000

275,000

275,000

Furniture

20,000

25,000

35,000

35,000

35,000

Computers & Software

10,000

17,500

22,500

22,500

22,500

Other

5,000

5,000

5,000

5,000

5,000

Less Accumulated

Depreciation

(15,417)

(16,458)

(19,792)

(28,125)

(28,125)

Total Fixed Assets $ 169,583 $ 181,042 $ 217,708 $ 309,375 $ 309,375

Other Assets

Intangibles : Germicide

Patent

1,000,000

875,000

765,625

669,922

586,182

Total Other Assets $ 1,000,000 $ 875,000 $ 765,625 $ 669,922 $ 586,182

Total Assets $ 1,395,475 $ 1,584,145 $ 1,582,467

$1,662,286

$1,804,161


Liabilities and Equity

Current Liabilities

Accounts Payable 29,000 34,956 48,704 66,036

67,421

Interest Payable - Long Term debt 3,948 12,977 13,321

13,744

13,294

Notes Payable & Short Term Debt

Current Long Term Debt Due 24,677 81,106 83,257 85,902

83,088

Total Current Liabilities $ 57,625 $ 129,040 $ 145,282 $165,681 $163,803

Long Term Debt Capital Infusion Balance

(includes accrued interest) 567,573 499,444 429,508 332,350

162,557

Total Long Term Debt Balance $ 567,573 $ 499,444 $ 429,508 $332,350 $162,557

Total Liabilities $ 625,198 $ 628,483 $ 574,790 $498,032 $326,360

Owner's Equity

Retained Earnings - Beginning

770,277 826,622

862,394

998,573

Retained Earnings - Current 770,277 56,345 35,772 136,178

315,425

Total Owner's Equity $ 770,277 $ 826,622 $ 862,394 $998,573 $1,313,998

Total Liabilities & Owner's

Equity $ 1,395,475 $ 1,584,145 $ 1,582,467

$1,662,286

$1,804,161



Appendix C : Projected Cash Flow Statement

LifeProtect, LLC

Projected Cash Flow Statement

Fiscal Year Begins 1/1/14 1/1/15 1/1/16 1/1/17 1/1/18

Cash on Hand - 92,141 83,116 94,741 84,831

Cash Receipts

Cash Sales Received - 916,700 1,173,376 1,536,389 1,793,982

Credit Collections Prior Year Sales - 83,333 213,333 279,333 326,167

Less Bad Debt Allowance

(8,333)

(21,333)

(27,933)

(32,617)

Loan Infusion 575,000

Cash Available before Cash Out $575,000 $ 1,083,841 $ 1,448,492 $ 1,882,530 $ 2,172,363

Cash Paid Out

Owner's Compensation 30,000 - 60,000 90,000 150,000

Inventory and Processing 57,500 460,000 515,200 674,590 787,693

Staff Compensation 62,500 255,000 314,125 387,684 416,761

Rent 15,000 60,000 60,000 60,000 60,000

Warehouse Machinery and Fixtures 150,000 - 25,000 100,000 -

Insurance 7,500 30,000 30,000 37,500 37,500

Supplies 5,000 10,000 15,000 25,000 30,000

Meals and Entertainment 2,500

5,000

8,000 11,000 14,000

Communications 1,250 10,000 17,500 21,000 25,000

Professional and Legal Fees 50,000 15,000 17,500 20,000 25,000

Utilities 3,000 12,500 13,000 13,000 22,500

Mileage Reimbursement 1,000

3,000

5,000 7,500 9,000

Other - Misc 3,000

6,000

6,000 6,000 6,000

Marketing Expenses 40,700 28,300 57,820 61,452 75,747


Less Accumulated Depreciation (15,417)

(16,458)

(19,792)

(28,125)

(25,313)

Sub-Total Cash Paid Out $413,533 $ 878,342 $ 1,124,353 $ 1,486,601 $ 1,633,888

Cash Paid Out (Non P&L)

Loan Principal & Interest Payments 28,625 94,083 96,578 99,646 96,382

Marketing and Advertising 40,700 28,300 57,820 61,452 75,747

Cash Set Aside - Capital Fund/Investments - - 50,000 50,000 110,000

Additional Debt Payment Applied to Principal

25,000 100,000 162,557

Sub-Total Cash Paid Out (Non P&L) $ 69,325 $ 122,383 $ 229,398 $ 311,098 $ 444,686

Cash Position End of Year $ 92,141 $ 83,116 $ 94,741 $ 84,831 $ 93,789



Appendix D : LifeProtect Targeted Hospitals by State

State

Number Gross Patient

% Marketing

Region Hospitals

Revenue ($000)

Funds Allocation

CA - California 355 $313,977,660

1 TX - Texas 391 $203,510,623

31%

West AZ - Arizona 74 $50,625,437

Sub Total 820 $568,113,720

NY - New York 204 $158,138,861

2 PA - Pennsylvania 184 $147,600,850

23%

East MA - Massachusetts 83 $50,464,380

NJ - New Jersey 75 $100,156,600

Sub Total 546 $456,360,691

OH - Ohio 153 $105,773,700

3 IL - Illinois 142 $105,680,184

22%

Central MI - Michigan 109 $67,708,340

IN - Indiana 98 $52,507,781

MO - Missouri 90 $51,848,495

Sub Total 592 $383,518,500

FL - Florida 214 $203,214,552

4 NC - North Carolina 106 $66,833,602

24%

South GA - Georgia 115 $64,775,078

TN - Tennessee 119 $57,681,468

VA - Virginia 92 $54,008,258

Sub Total 646 $446,512,958

Grand Total 2604 $1,854,505,869

(Hospital Statistics by State, 2012)

http://www.ahd.com/states/hospital_CA.html

http://www.ahd.com/states/hospital_TX.html

http://www.ahd.com/states/hospital_AZ.html

http://www.ahd.com/states/hospital_NY.html

http://www.ahd.com/states/hospital_PA.html

http://www.ahd.com/states/hospital_MA.html

http://www.ahd.com/states/hospital_NJ.html

http://www.ahd.com/states/hospital_OH.html

http://www.ahd.com/states/hospital_IL.html

http://www.ahd.com/states/hospital_MI.html

http://www.ahd.com/states/hospital_IN.html

http://www.ahd.com/states/hospital_MO.html

http://www.ahd.com/states/hospital_FL.html

http://www.ahd.com/states/hospital_NC.html

http://www.ahd.com/states/hospital_GA.html

http://www.ahd.com/states/hospital_TN.html

http://www.ahd.com/states/hospital_VA.html


Documents

Life Protect Business Plan Financial Section by Don Tatum