TinyHomz, LLCHeadquarters: Ithaca, New YorkEmail: TinyHomz@gmail.comPhone number: (559) 679-2446

President & Co-Founder – Kim McChristianVice President & Co-Founder – Jason DavisMarketing/Sales & Co-Founder – Erin KillionMarketing/Sales & Co-Founder – Brett Turner

Prepared For: Entrepreneurship & Venture Management, EEE 511324 April 2016

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Table of ContentsExecutive Summary................................................................................................................................................................... 3

I. Company Description............................................................................................................................................................4

II. Product....................................................................................................................................................................................... 6

Ithaca, New York Prototype .............................................................................................................................................7

III.  Industry Analysis................................................................................................................................................................ 8

IV.  Market Analysis................................................................................................................................................................... 9

Table 1. Target Customer Profile.................................................................................................................................10

V.  Competition.......................................................................................................................................................................... 11

VI. Economics of the Business............................................................................................................................................12

Table 2. Year 1 Cost Breakdown...................................................................................................................................13

Chart 1. Break-Even Analysis.........................................................................................................................................14

Table 3. 5 Year Break-Even Analysis..........................................................................................................................15

VII. Marketing and Sales........................................................................................................................................................15

VIII. Operations......................................................................................................................................................................... 17

Table 4. Development Schedule....................................................................................................................................19

IX. Management and Organization...................................................................................................................................20

X.  Capitalization and Structure.........................................................................................................................................20

XI. Development and Milestones.......................................................................................................................................21

XII. Risks and Contingencies............................................................................................................................................... 21

XIII. Financial Projections.................................................................................................................................................... 22

Table 5. Projected Balance Sheet.................................................................................................................................24

Table 6. Projected Income Statement........................................................................................................................24

Table 7. Projected Cash Flow Statement...................................................................................................................25

Table 8. Long-term Break-Even Analysis.................................................................................................................26

XIV. Summary and Conclusions.........................................................................................................................................27

Appendix 1: Models for Future Builds............................................................................................................................28

Modern Model........................................................................................................................................................................... 28

Great Escape Model.................................................................................................................................................................28

Appendix 2: References.........................................................................................................................................................29

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Executive Summary

TinyHomz ConceptOur business concept is a small home property development business, and our name is TinyHomz. Customers will purchase a small home on a small land plot. Each tiny home will range in size from 400 to 800 square feet. The benefit of TinyHomz over apartment living is that customers will eventually own their home and are able to build equity. We will build home developments in advance but leave some of the finishing choices to the buyer. Our customers will consist of low to moderate income customers; customers currently living in apartments or renting houses. Tiny homes will be built to serve customers with different tastes, we may add a centralized garden, picnic area, fitness center, or laundry amenities to some locations depending on local preference.

Unique Value Proposition Minimalist living is quickly gaining attraction across the United States as many people are making efforts to shed excess in their personal lives and embrace a simpler life. This style of living was formerly championed by those interested in living “off-the-grid” through the building of tiny homes. Our company, TinyHomz, seeks to provide minimalist living on a larger scale by building fixed tiny home structures in a development setting. This allows home ownership to become a viable option for lower to middle class individuals looking for simple, efficient, and environmentally friendly living spaces. We intend to form strong supplier and builder relationships in order to keep home costs to a minimum.

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I. Company Description

Elevator PitchMore than a HOME, TinyHomz is a way of LIFE. We want you to be a part of it. We

provide comfortable, simple living at an affordable price. TinyHomz are less expensive than larger ones in terms of taxes, construction, heating, maintenance, and repair costs. Following the recent economic crisis, Americans have shown more of an interest in tiny homes. We are currently securing financing to build our first 8-home development in Ithaca, New York.

Mission Statement TinyHomz’ mission is to provide safe, adequate, and affordable housing, and to promote

community, dignity, and hope.

ObjectivesTinyHomz’ main objective is to become a leader in the tiny home construction industry

by consistently exceeding customer expectations. We will do this by building safe, affordable, aesthetically pleasing housing developments. We will incorporate cost savings into the entire process and decrease our global footprint, which is valued by our environmentally conscious target market. Ultimately, we will help more renters, with modest means, become homeowners.

Business Model Our business model emphasizes cost-cutting throughout the entire value chain. By

continuously improving our processes, we will better serve our customers in terms of cost and time savings which will also increase our cash flow and overall profitability. We are passionate about providing affordable, minimalistic housing to our customer base. Our target market desires affordable, comfortable, and environmentally friendly housing. To achieve affordable home construction, we will mass produce the basic structure of the homes in batches of 6 to 8 at a time, and each location will accommodate 16 - 24 tiny homes, depending on land availability. By producing several homes at a time, we will save on production, labor, ordering, and supplier costs. Standardized processes include: assembly of the home’s framing, walls, foundation, floors, ceilings, heat/air, water, electricity, and supplier ordering. We will utilize a variety of low cost online tiny home designs, and our customer will be able to differentiate their own home by adding some of the final design elements.

We will team up with suppliers who embrace our philosophy of providing quality, affordable housing. Our suppliers will provide service after the sale, quality, and timeliness of service. We will develop a just-in-time (JIT) inventory delivery system, and suppliers will receive orders via electronic submission, which will lower our inventory and total costs. Maintaining mutually beneficial relationships with supplier partners is critical to our success.

As for our revenue sources, customers will purchase a new, 400-800 square foot tiny home. We will sell our homes directly to our customers, and this will allow us to realize positive cash flow quicker than rent-based revenue sources. Banks or loan companies will service the

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mortgages. We will concentrate on our core competencies of zoning, construction, marketing, and sales while using revenues from previous development builds to pay for future projects.

Summary of Activity to Date Opportunity evaluation Product placement and design researchMarket, industry, and competitor researchEvaluated the economics of the venture, exit strategies, and milestones

Current Stage of Development We are currently researching suppliers and tiny home space maximization, and securing

financing.

First Build LocationOur first build location for our tiny home development is Ithaca, NY. This location was

selected because of the availability of reasonably priced land, no tiny home developments currently exist there, and our target market is well represented and underserved. New Yorkers also tend to have a strong view on being environmentally friendly which will also help our cause.

Future TinyHomz development locations include: Walsenburg, CO, Sarasota County, FL, Union Mills, NC, Philadelphia, PA, and Spur, TX. We will further research each location to determine where we will build our second development. All of these locations are currently tiny home zoned.

Core Competencies Our core competencies are development, marketing, and sales. We will provide

affordable, comfortable housing with a personal touch. We will build most of the home, but save the final touches for our customer once financing has been approved. Our customers may choose paint colors and some interior fixtures, within a certain price range, providing a personal element and enticing more customers to buy.

Our company’s core activities include: development, construction, marketing, and zoning lobbying for future development sites.

Keys to Success Our keys to success will center around how well we manage all aspects of the

development process. Maintaining a low cost structure relative to other industry participants while also offering a high value tiny home is key. We must quickly build a web presence with our website and social media, promote the benefits of tiny home ownership, and quickly disseminate information that excites our target market. Our success will largely depend on how well we promote eye catching selling points such as our landscaping design, development amenities, and the personal touch aspect of our offerings will also be paramount to our success. Lastly, we will need to work with local governments to change zoning laws in order to facilitate future expansion. To sum it up, how well we manage the development process combined with how quickly we sell our homes will be key to TinyHomz success.

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Location and Facilities Initially, we will rent a small, low-rent central office in order to facilitate TinyHomz sales

and daily operations. Once a location for a TinyHomz community has been selected, assembly will be completed on site. All materials will be stored in a temporary central storage building. We plan on having a JIT inventory system in which resources and building materials will arrive shortly before they are needed. Our first development location will be Ithaca, New York.

II. Product

OpportunityThere is a low quantity of affordable, adequate, energy-efficient homes available for

ownership in the marketplace. Homeownership is predominantly unaffordable for our beachhead market and we aim to change this. Our business opportunity is a small home property development business named TinyHomz. Customers will purchase a tiny home with a small plot of land.

SolutionTinyHomz will change the face of homeownership by allowing lower to middle class

individuals an opportunity to own an affordable home while embracing the minimalist, tiny home lifestyle. We aim to increase the number of quality, affordable small home developments in the marketplace. Our company’s frugal, cost-cutting business model will be evident throughout every aspect of our value chain. Standardization of the home building assembly process is one key to our success. We will purchase all building materials from our supplier network.

We want to change lives by providing a more affordable housing option. Our TinyHomz will range in size from 400 to 800 square feet. Land will be researched and purchased. We will build several TinyHomz in a batch of 6 - 8 homes at any given time. City zoning and build requirements will be researched for each location.

Since we will be building each development in batches of 6 - 8 homes at a time, standardizing the construction assembly process will help us keep total costs low which will allow us to provide our customers with an affordable home. This will result in cost savings for our customers and will also allow for simultaneous construction to occur at a much quicker pace than if we were to construct homes one by one.

We have a great opportunity to truly change lives by revamping the way tiny homes are produced, marketed, and sold to customers.

Benefits to CustomerOwning a tiny home leads to financial freedom and the freedom to live as you desire.

When a customer owns a home versus renting one, they are able to make home and land modifications while building home equity over time. Our home developments will be built in advance, but we will leave some of the final touches for our customer.

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Since our tiny homes will be 400 - 800 square feet, monthly mortgage, utility, and property tax payments will be lower when compared to a traditional larger home. A low-maintenance yard is also included in the tiny home selling price. Centralized amenities, such as a community garden or a picnic area, will appeal to our target market which includes environmentally conscious, young (22 to 34 years of age) recent college graduates with stable incomes. Our customers who choose to live the minimalist, tiny home lifestyle will benefit financially and socially, while playing a role in the environmentally conscious tiny home movement.

Technical DescriptionStrategic management, operations planning, build site research, and onsite construction

will be the primary responsibilities of our President, Kim McChristian, and Vice-President, Jason Davis. Co-Founders Erin Killion and Brett Turner are our Executive Marketing/Sales Directors. We will hire a full-time, permanent contractor to ensure a high quality of construction workmanship. Plumbing and electrical work will be contracted out initially. All Co-Founders will pitch in where needed.

Ithaca, New York Prototype

Bedrooms: 2 Full Baths: 1 Kitchen/Dining Space: 1 Living Area: 1 Levels: 1 Foundation: Slab Exterior Style: Roof: Sheet Metal Fireplace: Yes Ceiling Height: 9’ Width x Depth: 30' x 20' Square Footage: 600 square feet Covered patio: Optional 112 square footage Design cost: $575 per 8 plans

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DifferentiationWe recognize the importance of aesthetic differentiation. We will give our customers an

opportunity to individualize some of the final design elements and add personal touches via painting, interior design fixtures, or curb appeal elements. Each build site will offer different customization options based on local customer preferences and cost considerations. We want our customers and stakeholders to be proud of our affordable, aesthetically pleasing, environmentally friendly housing developments.

What differentiates us from other tiny home construction companies is that TinyHomz is the first to establish a community of permanent tiny homes. Up until now, the tiny home movement has been built by individuals spread across the United States, primarily on mobile platforms. We are bringing that community together by offering permanent home developments that also stay true to the affordable, minimalist, and comfortable tiny home lifestyle.

III. Industry Analysis

Industry OverviewAs the United States has emerged from the economic slump that reached its ultimate

low in 2009, many have looked to non-traditional living situations as a way of living more affordably and within their means. Some people live in smaller homes as a matter of principle, embracing the minimalist lifestyle, while others choose smaller homes because of the cost-saving avenue that it affords them. Although the United States’ economic landscape remains volatile, many lower income citizens are still looking to realize the goal of homeownership, now made possible through the affordability of smaller than average homes. (Outside Online, 2015)

Supply and Distribution Both supply and distribution are factors that are greatly influenced by the geographic

placement of a tiny home, or in this case, a development. Within the home building industry as a whole, suppliers are often eager to agree on large contracts with home builders as a successful builder represents a consistent stream of revenue for the suppliers (ProSales, 2013). Distribution, in the case of the home building industry, is controlled by the demand of the buyer, as homes are “distributed” or sold to the consumer. Websites like tinyhouselistings.com and their increasing interest from consumers is indicative of the desire that many people have for small homes.

Economic Influences As previously mentioned, economic swings have affected, and will continue to affect the

ability of Americans to own their own home (The Economist, 2009). Tiny home living can be designed around minimizing the effects that economic swings have on Americans’ ability to own their own home and help them live within their means. Additionally, as the Federal Reserve Bank has recently raised interest rates, these insidious costs associated with home ownership are beginning to once again make acquiring a home an increased challenge.

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Entry BarriersOverhead capital will always pose a challenge to entry, as acreage must be purchased

before any developments can be built. Along with that, the location of a new subdivision may also be a barrier, as the most affordable land in certain regions may not be in the area prospective buyers are looking for. Furthermore, the growing interest in tiny homes has begun to build a formidable list of potential competitors. Even though tiny homes make up just a small fraction of the overall housing market, as the list of tiny home competitors grows, market share will be more of a challenge to earn and retain.

Regulatory IssuesBuilding codes on the whole can be confusing and difficult to navigate. Establishing

relationships with contractors who are trained and have experience in the business is crucial for a newcomer to the industry. Along with that, different areas of the country have different minimum housing size regulations, making tiny home development a dynamic process as different codes and regulations must be followed based on the geographic area. Additionally, zoning land for residential real estate comes with its own set of stipulations that must be adhered to. (thetinylife.com, 2011)

IV. Market Analysis

Definition of Overall MarketOur beachhead market consists of lower to middle class singles or small families that

desire simple living quarters without a large debt load in the Ithaca, NY area. The parameters that define this overall market can vary widely depending on the situational context of each customer. These specific characteristics that segment the market will largely affect the marketing strategy, home type, and price point of the initial TinyHomz development.

The current small housing market in Ithaca, NY is extremely limited with very few options for customers. The price per square foot for homes under 1,200 square feet is between $120 and $220 depending on the location, age, and condition of the home, whereas the average is $158 per square foot (Zillow, 2016).

Market TrendsThe simple, efficient, environmentally conscious lifestyle is gaining popularity in the

United States. Tiny home developments have begun to sprout in several small towns and cities, but the rate at which these developments are created is much slower than the rate the market will support.

Market SegmentsThe large overall market can be broken down into multiple segments. Family status,

household income, age, current living situation, education, and employment/occupation are the demographics used to further segment the market.

The segment of most interest is that of single, recent college graduates, age range from 22 to 34 that have a stable full time job, and currently renting a property. Tompkins County,

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home of Ithaca, NY has a population of over 101,000, of which 13,700 are in the 25 to 34 age range (Census, 2010). The number of households in Tompkins County totals to 39,000, and approximately 25% of those are living alone and under the age of 65 (Census, 2010). After a couple conservative assumptions, the target market that is single between the age of 25 and 34 sums to 1,780 individuals plus several more in the 22 to 25 age range that meet the necessary income (Census, 2010). The total addressable market (TAM) size for Ithaca, NY for the target customer is $169 million, assuming 600 square foot homes at the average cost per square foot. The education demographics, current living situation, and employment profile of the Ithaca, NY region are not currently used to calculate the monetary market size but will be included as more research is completed. The addition of more criteria will reduce the TAM but help the team focus in on the specific customer with every phase of the business.

Customer Characteristics & NeedsThe use of psychographics based on attitudes and hobbies will be very important to

structure the development, home needs, and the buying process to suit our target market along with the lifestyle expectations of the consumer. A detailed target customer profile is shown in Table 1.

Table 1. Target Customer Profile

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Purchasing Decision ProcessOne major advantage for the “single without children living in home” target segment is

the simplification of the decision making process. The single individual becomes the decider, buyer, and user of the product coupled with a larger percentage of income being disposable. The decision making process for a single person that has never bought a home and is currently renting can be complicated. The final product and service that TinyHomz offers will reduce the stress and financial worry for the first time home purchaser.

V. Competition

Our primary competitors are affordable rental living, one-off tiny home builders, condo or small home ownership, and mobile home parks (“trailer parks”). We will differentiate ourselves from each of these competitors in different ways.

Affordable Rental LivingPeople in our target demographic need less square footage to live and aren’t looking to

be saddled by a large mortgage. They don’t necessarily have the credit to do so either. They do not see housing costs as a way to save and build equity; rather they see them as a monthly cost and money that is gone once it is spent. Apartments or other rentals are a reasonable option to them. The exterior upkeep is minimal and mostly covered by the owner of the building and the rent prices are affordable. Our competitive advantage in this market lies in the fact that after you pay your monthly housing costs you have more than just a place to live for the next month. You are paying to own the place you call home or paying off a mortgage that doesn’t need to seem endless and overwhelmingly high. Also, our development will contain many of the amenities of apartment living.

One-off Tiny Home BuildersPart of the draw of tiny home living is the opportunity to design an eco-friendly,

affordable, and unique place to live. The contractors that specialize in this market all cater to the home builder who wants to have a hand in the design. This individualization is obviously a very expensive process. We compete with this challenger by providing an affordable, mostly move-in ready home, with our customers making some final touch customizations instead of designing a unique home every time.

Condo or Small Home OwnershipWe also compete in this market because of our volume and our unique neighborhood

design concept. A homebuyer looking for a low-cost option that is interested in building equity would choose our product versus the alternative because we offer much lower cost and enable people, who otherwise wouldn't be able, to afford new and well-designed homes.

Mobile Home ParksMobile home parks have a bad reputation in most cities, and while our tiny home

developments on the surface seem very similar, we provide a different way of life. First of all,

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we compete by beginning in cities where zoning allows for our tiny homes to be built on permanent foundations. In the future, we plan to work with local governments to loosen currently existing zoning laws, and this will allow us to build in more cities. Once we have sample tiny home villages to cite, we will have more leverage to show that we are not building inhumane slums. The design and permanence of our product, coupled with the attractive price point we can offer, will make competition in this area easy.

Future competitors will likely be others looking to challenge our model. The idea of homeownership and living tiny is starting to catch on. The market is sure to become saturated in the future with people trying to produce a product similar to ours. We will be able to combat this by being the first of our kind with a commitment to continuously improve all aspects of the service we provide.

VI. Economics of the Business

Revenue Sources and Margins Our revenue stream consists of small home sales in a development setting. We

anticipate selling 8 homes during our first year. Our aim is to sell each home for $92,000, which would equal $736,000 in net revenue. Further market research is needed to ensure our selling price is appealing to our beachhead market, while also providing a positive, sustainable cash flow to ensure TinyHomz long term viability. Our estimated contribution margin in the first year per home is $29,451, with a 27.1% contribution margin ratio.

Fixed and Variable Costs Our estimated total fixed costs for year 1 is $369,000 and the total variable costs per

home are $62,550. The expectation is for 8 homes to be built and sold in year 1, the overall cost per is $108,675 with a total cost of $849,400.

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Accounting, Legal 10,000.00$ Depreciation 5,500.00$ Home Desing Plans 5,000.00$ Insurance 4,000.00$ Interest Expense 68,000.00$ Marketing 5,000.00$ Payroll 230,000.00$ Rent & Utilities 20,000.00$ Research & Development 5,000.00$ Systems, Software, and Supplies 16,500.00$

369,000.00$

Variables Costs based on Dollar Amount per UnitLand Cost per unit 3,750.00$ Pre-Construction Cost per unit 10,500.00$ Material Cost per unit 30,000.00$ Subcontract Cost per unit 15,000.00$ Legal per unit 1,000.00$

60,250.00$ Variables Costs based on PercentageExpected Revenue per unit 92,000.00$ Revenue based Commissions per unit 2.50%

2.50%

62,550.00$ 500,400.00$

Contribution Margin per unit (CM) 29,450.00$ Contribution Margin Ratio (CMR) 27.1%

108,675.00$ 869,400.00$

Variable Cost per Unit (V)

Total Cost per UnitTotal Cost (TC @ 8 Units)

Total Variable Cost (TFC @ 8 Units)

Total Fixed Costs (TFC)

Cost Breakdown for Year 1Fixed Costs

Variable Costs

Table 2. Year 1 Cost Breakdown

Start-up CostsTinyHomz will need $900k in financing in order to cover the company from startup to

the first round of sales at the end of year 1. We will borrow $800k and $100k will be founder financed.

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Breakeven Chart and CalculationThe break-even home price is roughly $108,675 in the first year, and the break-even

sales total is $869,400. At the expected sell price of $92,000, TinyHomz will not reach break-even revenue in the first year.

Chart 1. Break-Even Analysis

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Five Year Break-Even AnalysisAs the company completes infill development into the same community and expansion

in new developments the fixed costs are lowered due to the higher production rate of tiny homes. Over a five year period, the overall break-even price goes from $108,675 down to $81,502.

Year 1 Year 2 Year 3 Year 4 Year 5Revenue 736,000 1,580,800 2,440,090 3,419,587 4,417,386

Cost of RevenueVariable 482,000 940,630 1,478,961 1,992,998 2,593,182Fixed 0 0 0 0 0Total 482,000 940,630 1,478,961 1,992,998 2,593,182

Operating ExpensesVariable 18,400 39,520 61,002 85,490 110,435Fixed 369,000 403,000 489,259 516,240 556,479Total 319,400 378,020 502,761 579,730 666,914

Total Costs & ExpensesVariable 500,400 980,150 1,539,963 2,078,488 2,703,616Fixed 369,000 403,000 489,259 516,240 556,479Total 869,400 1,383,150 2,029,222 2,594,728 3,260,095

Variable Costs/Revenue Ratio 68.0% 62.0% 63.1% 60.8% 61.2%Fixed Costs/Revenue Ratio 50.1% 25.5% 20.1% 15.1% 12.6%Contribution Margin $235,600 $600,650 $900,127 $1,341,099 $1,713,770Contribution Margin Percentage 27.1% 43.4% 44.4% 51.7% 52.6%Break-Even Revenue $869,400 $1,383,150 $2,029,222 $2,594,728 $3,260,095Break-Even Sell Price Per Home $108,675 $86,447 $84,551 $81,085 $81,502Rate of Return -15.3% 14.3% 20.2% 31.8% 35.5%

Break-Even Analysis

Table 3. 5 Year Break-Even Analysis

VII. Marketing and Sales The company’s marketing philosophy is to act as a missionary for the tiny house

movement and make tiny house living attainable for the average consumer. We will be marketing the lifestyle a tiny home allows, freedom from debt, environmental sustainability, and the low-stress environment of not being surrounded by piles of possessions.

First and foremost, our beachhead market (and our offshoots) desire to live without a rent payment year after year, seeking economic freedom and the ability to live within their means while also living in a home they own and can have pride in. We will start small in our initial market with word-of-mouth advertising and small road signage, mailers to current renters, and small budget advertising. Our beachhead is a unique consumer and will require a targeted sales approach. Conveniently, the local advertising tools on Google and Facebook will enable us to reach out to the exact market we desire to contact, even with a limited advertising budget (necessitated by the tight budget of our initial venture). In terms of market positioning, we are the only local company making new, affordable, “tiny homes” in the area.

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On a national level, we do have some competition, but our permanent structures in small neighborhoods are a unique offering that have yet to find an exact equal. In this way we will be able to leverage word of mouth, so that when people see and hear of tiny homes, they will begin to think of TinyHomz. We have a moderate background in using Google AdWords and can confidently use this tool, as well as learning to use its Facebook counterpart, to directly access our target audience.

We offer a narrow range of products centering around our core offering, a tiny home in an organized and aesthetically pleasing development.

Pricing is discussed at length in other sections of this document. More important than the bottom-line number is our pricing strategy; that there should be very low financial barriers to entry for a person who desires to own their own tiny home. We believe in the importance of the American Dream of homeownership. While not a charity company looking to hand out homes for free, we are committed to keeping our operation as lean as possible in order to maximize revenue for the company while also minimizing cost to the consumer. It is important to remember that the founders are not in this venture to make a quick buck. We all strongly believe in the importance of affordable, sustainable living. We all see friends and family who are caught in the “rat race” and trapped in the never-ending cycle of rental, who desire autonomy and the freedom of choice that comes with home ownership and find it continually out of their reach. We believe all hardworking Americans should have the opportunity to retire every day to a dwelling they own and can be proud of. These tightly held personal beliefs are at the core of our company and drive every decision we make in terms of pricing and cost.

Placement of our developments carries a unique difficulty. In building tiny, we can potentially run afoul of any number of local or state codes and restrictions placing minimum square footage and room requirements on single-family dwellings. These codes, many dating back to the days of greedy slumlords packing as many people as possible in city apartment buildings, are perpetuated by real-estate agents and builders who have grown accustomed to the status quo and do not desire new competition. Added to these are current landlords who may potentially see a decline in rent prices as people make the decision to move to a home of their own for less than they’re paying in rent. In other words, there are many stakeholders with a vested interest in keeping developments such as ours out of their communities. Our placement strategy will be to build first where the building codes allow and demonstrate to local governments that these developments work. We desire to change regulations in the long-term. This is why we have legal representation as an integral part of our startup. We also believe success and growth will become easier in time as more communities make zoning and other regulatory changes and as customer success stories are shared.

We already discussed the basics of our promotion plan. It is clear that these homes have a small potential pool of buyers and mass-market advertising would be a waste of money and effort on our part. Instead we intend to use targeted advertising using Google AdWords to identify people in whatever geographical market we are currently building in. We will build a data bank of search terms including: sustainable, affordable, tiny home, home ownership, for rent, mortgage, etc. As our venture grows we will use conversations with our initial consumers to determine what to add to our list. From initial market research, we are confident that there will be interested people in our target market and location. We only need to find them and

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then the dramatic improvements our company will help them make to their lives will sell our brand.

This strategy is a direct reflection of our target market and their individualism and the likelihood of a younger demographic to Google the solution to their problems. These aren’t the people whose first action when looking for a home is to pull up the classifieds or run to hire an agent; they’re likely to take to the internet to search for what they desire and we aim to be there for them.

Our sales will be as straightforward as possible. It is common for developers to pay real estate agents a premium (double commission, bonuses, etc.) to bring customers to their developments and we intend to avoid that practice. We intend to work as closely with the buyers as possible. Obviously, if they desire to employ a real estate agent that is their prerogative and we will not discourage it, but if they are comfortable working directly with our sales team it will be ideal. If the buyer employs a real estate agent we are prepared to pay standard commissions. We are going for a transparent sales process and feel that our overhead/revenue are small enough that sharing the costs openly with our customers will only help our cause. A very frustrating part of real estate transactions is how shrouded in mystery they are to the average consumer and we desire to use our community as a platform to remove the mystery from the process.

Sales forecasts are good. Our lean just-in-time construction inventory sourcing will enable us to build as soon as buyers are identified. We will strive to find the balance between a long wait time for your home and pre-built homes that cannot be personalized at all.

VIII. Operations

Product DevelopmentThe TinyHomz product development will focus on specific customer needs in order to

create a final home that meets all requirements. The Marketing and Sales team will work closely with the Operations team to promote fluidity in the product development process. Each tiny home will go through an extensive step-by-step process divided into categories to help the business manage the project and to help the customer understand the advantages to the quality and sturdiness of tiny home builds. The phases are land, home design, material supply, off-site construction, and on-site construction.

The land phase will include research for high value properties near the target market. Once a viable property is identified, the acquisition of the land will begin. After acquired, TinyHomz will rezone the property to meet all requirements for smaller footprint homes. While rezoning steps are being taken, the roads, water and sewer lines, the property sections, and other construction preparation and design needs will be fulfilled. Efficiency and cost control in the land phase of product development will consistently increase profit margins and reduce purchase to sell cycle times.

Home design will consist of the Marketing and Sales team working with the customer to clearly define all the details of their tiny home. The design step is crucial to be able to create the product the customer desires. The project management plan will allow for a significant amount of time and thought that is required for the home design. The goal of TinyHomz is to meet the customer needs, especially in the areas of efficient use of space, small environmental

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footprint, quality assurance, and low cost of ownership. Floor plans, material selection, landscape desires, and other customizable features will be decided upon by the customer, with TinyHomz industry experts available for consultation and questions.

Supply vendors will have a large direct impact on variable costs for TinyHomz operations. Strong relationships and negotiation of dual benefit contracts will help both parties reach sustainable growth. TinyHomz will be diligent in supplier negotiation, selection, and material quality assurance. Given we will build 6 to 8 homes at a time, we will be making large materials purchases. This should give us more leverage than if we were simply building one home at a time. We expect our leverage will improve as we become more established and as the number of homes produced increases. Each aspect of material supply will be a value add proposition, reducing variable cost and increasing customer satisfaction in the long-term.

TinyHomz’ core utilization of lean methods and JIT inventory for construction of the home is a key component to reduce the build cost of the home and improve overall quality. Home construction will be performed by construction experts that will focus on the building process, scheduling, and management of the construction. The majority of construction will be subcontracted out and completed in large indoor facilities that reduce the cost, time, and weather exposure of the home while being built. The pieces of the home will be shipped to the site once the pre-construction is completed which includes leveling, water, electric, sewage, and foundation. The modular pieces of the tiny home will be set in place and attached to the foundation similar to a normal construction process. The roof will be added as soon as possible if it was not shipped attached in order to add protection to the inner portion of the home. Once the home is in place, the final phase will begin which will include wall finishing, plumbing, electrical, flooring, and other interior touches. Customers will decide on the final finishing touches of their new tiny home. This gives each customer the chance to change or adapt small personal touches to the overall look and feel of their tiny home.

TinyHomz will be meticulous with inspection and quality assurance of the home before the sell is finalized. Inspections will be standard and clearly defined so the customer knows the extent of quality that TinyHomz strives for. The customer will be allowed to join in the inspection of the tiny home if preferred.

The full TinyHomz product development cycle is expected to take 8 to 12 months, which will be dependent on government regulation, customer identification, supply availability, and weather uncertainty. The schedule is shown in the Gantt chart below:

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Table 4. Development Schedule

Key SuppliersAs TinyHomz will be batch building 6 to 8 homes at a given time, this will allow for

supply negotiation for bulk delivery. Suppliers of raw materials and services will be an important aspect of the business. TinyHomz will build working relationships with suppliers of materials such as concrete, construction equipment, wood, steel, and other raw materials agreed upon in material selection. The services that will need to be supplied will range from construction expertise and physical labor jobs during the construction cycle to knowledgeable inspectors or interior designers.

Customer Service and SupportCustomer service will be a high priority for TinyHomz, as the word of mouth

communication from each customer that has a fantastic experience and high quality product will be a driving force in potential growth. The customer satisfaction is of utmost importance, especially in the first few product development cycles in order to fine tune the product, further increase quality, and better fit a product to the target market.

We will conduct primary customer research by asking customers questions about their current living situation, desired future home, demographics, lifestyle, and home pricing considerations, using this research to guide our design, construction, and marketing/sales efforts.

We want our customers to get excited about tiny home living. They are free to customize certain final touches for their home. We will have a list of customizations they may make. Once a customer’s financing has been approved, certain customizations are selected by the customer. For example, a customer may select their bedroom and bathroom paint colors from 10 choices, and they may select certain interior and outside lighting fixtures. Potential and existing customers will have easy access to our website, email, and a phone number to contact if they have any questions. We will quickly respond to questions and inquiries, within 24 hours,

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Monday through Saturday. Quality construction combined with service that exceeds customer expectations is what we strive to achieve.

FacilitiesThe facilities for the operations of TinyHomz will mainly consist of on-site construction

locations. Support for the operation, such as marketing, finance, and sales, will be located in a centralized office near the construction location, which will initially be Ithaca, NY. Complete understanding of the operation by all employees will be the goal, which will result in more fluid transitions between different phases of product development, reduced mistakes, and a strong team environment.

IX. Management and Organization

Management TeamRecognizing gaps in the home industry and seeing the growing market of aspiring

minimalist homeowners, the management team of Kim McChristian, Erin Killion, Jason Davis, and Brett Turner teamed up to provide a new way to realize home ownership. The team formed around a common interest in entrepreneurship and a passion for helping others realize the joys of home ownership. The team brings together a wealth of management and leadership experience in the banking industry, military, academia, engineering, and the oil and gas industry. Kim McChristian is the current management team leader and President, supported by the financing expertise and Vice-President duties of Jason Davis, while Erin Killion and Brett Turner manage the marketing and sales components of TinyHomz.

Open PositionsCurrently, open positions exist for a supervisory contractor position to oversee the

physical building of the first development, as well to help round out the industry expertise of the management team.

Key PersonnelDue to the legalities of zoning restrictions in different geographic locations, the

TinyHomz team will partner with a local legal team well-versed in property development, so as to employ the regional expertise of a local legal firm. Additionally, the TinyHomz team plans on incorporating a web professional from the local university, as the need for a web presence is vital in today’s business environment.

X. Capitalization and Structure

Legal Structure of CompanyTinyHomz is a limited liability corporation (LLC), headquartered in Ithaca, NY.

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Present Equity Positions Currently, equity stakes in TinyHomz are distributed equally between the four founders

of the business. Further equity positions in the business will be distributed to the team’s anticipated contracting supervisor and web specialist.

Deal Structure TinyHomz is seeking $800,000 in seed-funding by means of debt financing through a

traditional bank business loan, with another $100,000 in funding provided by the founding team.

Exit StrategyThe TinyHomz team expects the breakeven point to be reached in year 2 of the

business. Taking into consideration market fluctuations and national response to tiny home living as it grows in popularity; TinyHomz anticipates growing the business to various locations across the United States. By year 7, as the tiny home movement grows led by the ingenuity of TinyHomz, we anticipate an acquisition by a larger home construction company looking at capitalizing on the tiny home market.

XI. Development and Milestones

Use of FundsFunds will be used to purchase land, pre-construction, construction, marketing and

sales, and overhead for our initial location in Ithaca, New York.

Company Development Milestones: Land purchased, home designs finalized, and start construction (Completed by year 1,

month 6) Signing of significant contracts (Sign contracts to purchase land and sign employee

contracts: contractor, landscaping designer, and interior designer, by year 1, month 6) Construction completed for first development of 8 homes (Completed by by year 1) Sell our first development of 8 homes in Ithaca, New York (Completed by year 1) Achievement of Break-even Performance (Completed by year 2) Expansion

Year 1: 8 homes completed - 1 new development started Year 2: 16 homes completed - 1 new development started Year 3: 24 homes completed - 2 new developments started Year 4: 32 homes completed - 2 new developments started Year 5: 40 homes completed - 3 new developments started

XII. Risks and Contingencies

Any business that builds under the assumption that customers will be interested in buying takes on a lot of risk. Our biggest risk is that we will build a development and be unable

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to find buyers for the homes. We have determined that the risk of homes remaining unsold is worth taking on to prevent the alternative risk, that we would find interested buyers who are unable or unwilling to wait for a home to be built from the ground up. Our model, where homes are constructed but final finishing details are options available to the homebuyers, is the middle-ground we feel best understands and mitigates the risks associated with building homes for buyers. It is worth noting that this technique is fairly common in the lower-end homebuilding industry where middle-class neighborhoods often have several homes being built “on spec” that a buyer can customize finishing on but doesn’t have to wait six months or more for a custom home to be built from the ground up. As this model works well in this comparable industry we are confident applying it to ours.

Our second biggest risk is that once we build in all the tiny home friendly communities that can support us; we will be unable to change local zoning restrictions in cities that are currently closed to our idea. We are going to mitigate this risk by spreading the tiny home word far and wide, getting the media interested in our idea, and trumping up the virtues of a tiny lifestyle. Many of these zoning restrictions, as we’ve discussed earlier, exist to prevent landlords from abusing tenants and make housing livable for Americans with smaller budgets; protecting the average person from a predatory housing provider. Once we can demonstrate our TinyHomz are compatible with a healthy and happy life we are confident this zoning barrier will fall. It is a calculated risk we are comfortable with.

Third, we have all the same risks in construction that any builder takes on. We could find that our JIT inventory for building arrives late because of weather or hiccups in the process of our suppliers. We could have issues with safety or workers’ compensation at our construction sites. We must mitigate these risks by working with trustworthy suppliers and subcontracting construction companies with a strong safety record and that we trust.

TinyHomz is a business with quite a few very different risks to our operations. We firmly believe that we are going to be providing a service that is lacking in this country and eventually we can grow to a point that most of these risks will become our strengths. We will never completely take the risk out of construction, as weather and supplies will always be a concern. We will be working from day one to reshape the homebuilding market to make it a friendlier place for non-traditional builders and this is an avenue where we believe in our potential for success.

XIII. Financial Projections

TinyHomz financial strategy is managed growth for the first 5 years, the target revenue growth year-over-year is an average of 59% and unit growth year-over-year is an average of 52%. Once this 5 year managed growth is reached, then the founders will determine if more expansion is necessary or if the growth should be limited in order to maintain a production of 40 high quality products per year. By the end of year 7, it is expected that the TinyHomz will be sustainable and sold to a larger construction company looking to expand into the tiny home marketplace.

TinyHomz financial projections were created using an estimated start date of January 1, 2017. There will be a 0.5% commission on revenue for the four founders and single employee

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which results in a total of 2.5% of revenue until more employees are hired. The income tax rate for the business will not apply since the company is founded as an LLC. The taxes will be transferred directly to the founders of the company.

Several assumptions were used to create the TinyHomz financial projections, all of which are based in logic and adjusted toward a conservative approach. The most important assumptions are as follows:

Sell price increase per year is 4% Land cost increase per year is 3.5% Pre-construction cost increase per year is 3.5% Material cost increase per year is 3.5% Subcontractor cost increase per year is 1.5%

o Lower due to more efficient product development cycles as experience increases Short term debt interest rate is 7% Long term debt interest rate is 10% Tax rate is 0%

o Company founded as LLC No realtor commission fees included

o Goal is to reach the customer directly with the marketing and sales team

TinyHomz financial forecasts are promising, and seek to reach positive cash flow by the end of year 2. The goal of TinyHomz is to keep inventory very low in comparison to the overall assets of the company. Since only 8 homes are projected to be built and sold in 2017, inventory will not be a major influence on overall financials.

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Begin Year 1 Year 2 Year 3 Year 4 Year 5ASSETS CURRENT ASSETS Cash 100,000 (119,840) 404,446 1,055,554 2,530,738 4,541,761

Accounts Receivable 73,600 158,080 244,009 341,959 441,739

Inventories 88,320 189,696 292,811 410,350 441,739 Other Current Assets 7,360 15,808 24,401 34,196 44,174

Total Current Assets 100,000 49,440 768,030 1,616,775 3,317,243 5,469,412PROPERTY & EQUIPMENT 0 11,000 9,500 7,333 9,333 12,667

TOTAL ASSETS 100,000 60,440 777,530 1,624,108 3,326,577 5,482,078LIABILITIES & SHAREHOLDERS' EQUITY CURRENT LIABILITIES Short Term Debt 400,000 400,000 350,000 250,000 100,000 0 Accounts Payable & Accrued Expen 36,800 94,848 146,405 239,371 353,391 Other Current Liab 7,360 15,808 24,401 34,196 44,174 Current portion of long term debt 0 0 0 0 0 0

Total Current Liabilities 400,000 444,160 460,656 420,806 373,567 397,565 LONG TERM DEBT (less current portion) 400,000 400,000 400,000 300,000 150,000 0 STOCKHOLDERS' EQUITY CommonStock 0 0 0 0 0 0 Preferred Stock 0 0 0 0 0 0 Retained Earnings (83,720) 616,874 1,603,302 3,503,010 5,784,514

Total Equity 0 (83,720) 616,874 1,603,302 3,503,010 5,784,514TOTAL LIABILITIES & EQUITY 800,000 760,440 1,477,530 2,324,108 4,026,577 6,182,078

Projected Balance Sheet

Table 5. Projected Balance Sheet

Year 1 Year 2 Year 3 Year 4 Year 5NET REVENUES 736,000 1,580,800 2,440,090 3,419,587 4,417,386COST OF REVENUE 482,000 496,190 1,021,681 1,051,935 1,624,760 % of Revenues 65.5% 31.4% 41.9% 30.8% 36.8%GROSS PROFIT 254,000 1,084,610 1,418,408 2,367,651 2,792,626 % of Revenues 34.5% 68.6% 58.1% 69.2% 63.2%OPERATING EXPENSES

Sales & Marketing 104,360 124,008 147,657 175,972 203,727Research & Development 10,000 23,000 30,000 30,000 30,000General and Administration 155,360 172,508 206,824 239,972 277,394Product Development 49,680 58,504 118,280 133,786 155,792

Total Operating Expenses 269,720 319,516 384,480 445,944 511,122 % of Revenues 37% 20% 16% 13% 12%EARNINGS FROM OPERATIONS (15,720) 765,094 1,033,928 1,921,708 2,281,504EXTRAORDINARY INCOME / (EXPENSE) 0 0 0 0 0EARNINGS BEFORE INTEREST & TAXES (15,720) 765,094 1,033,928 1,921,708 2,281,504INTEREST INCOME / (EXPENSE) (68,000) (64,500) (47,500) (22,000) 0NET EARNINGS BEFORE TAXES (83,720) 700,594 986,428 1,899,708 2,281,504TAXES 0 0 0 0 0NET EARNINGS (83,720) 700,594 986,428 1,899,708 2,281,504 % of Revenues -11.4% 44.3% 40.4% 55.6% 51.6%

Projected Income Statement

Table 6. Projected Income Statement

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Begin Year 1 Year 2 Year 3 Year 4 Year 5OPERATING ACTIVITIES Net Earnings (83,720) 700,594 986,428 1,899,708 2,281,504 Depreciation 5,500 7,500 10,167 8,000 10,667 Working Capital Changes

(Increase)/Decrease Accounts Receivable (73,600) (84,480) (85,929) (97,950) (99,780)(Increase)/Decrease Inventories (88,320) (101,376) (103,115) (117,540) (31,388)(Increase)/Decrease Other Current Assets (7,360) (8,448) (8,593) (9,795) (9,978)Increase/(Decrease) Accts Pay & Accrd Expenses 36,800 58,048 51,557 92,966 114,020Increase/(Decrease) Other Current Liab 7,360 8,448 8,593 9,795 9,978 Net Cash Provided/(Used) by Operating Activities (203,340) 580,286 859,108 1,785,184 2,275,022

INVESTING ACTIVITIES Property & Equipment (16,500) (6,000) (8,000) (10,000) (14,000) Other

Net Cash Used in Investing Activities (16,500) (6,000) (8,000) (10,000) (14,000)FINANCING ACTIVITIES Increase/(Decrease) Short Term Debt 0 (50,000) (100,000) (150,000) (100,000) Increase/(Decrease) Curr. Portion LTD 0 0 0 0 0 Increase/(Decrease) Long Term Debt 0 0 (100,000) (150,000) (150,000) Increase/(Decrease) Common Stock 0 0 0 0 0 Increase/(Decrease) Preferred Stock 0 0 0 0 0 Dividends Declared 0 0 0 0 0

Net Cash Provided / (Used) by Financing 0 (50,000) (200,000) (300,000) (250,000)INCREASE/(DECREASE) IN CASH (219,840) 524,286 651,108 1,475,184 2,011,022CASH AT BEGINNING OF YEAR 100,000 (119,840) 404,446 1,055,554 2,530,738CASH AT END OF YEAR 100,000 (119,840) 404,446 1,055,554 2,530,738 4,541,761

Projected Cash Flow Statement

Table 7. Projected Cash Flow Statement

In year 2, the balance sheet gets stronger as the first round of high return infill homes are completed. The number of homes sold doubles from 8 to 16, which creates the first positive cash flow for TinyHomz. TinyHomz also begins paying down short term debt in year 2 and long term debt in year 3 once positive cash flow is established for two consecutive years. The 5-year target is to fully pay off all financed debt and support further operational expansion from cash flow.

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Table 8. Long-term Break-Even Analysis

Breakeven is not met in year 1, as this is the year with the highest fixed and variable cost. The reason for this is two-fold. First, only 8 homes are built and sold which causes the

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fixed cost to be high due to employee salaries and one-time company startup costs. The second reason is that all 8 homes are the lower return first batch of the development. The infill product has higher return due to lower variable costs with significant reduction in land purchase cost and pre-construction development cost. The high return on the first batch of infill homes is obvious in year 2, where the financial health of the company becomes very strong.

XIV. Summary and Conclusions

TinyHomz is dedicated to enabling the American Dream and making homeownership attainable for everyone who desires it. We are capitalizing on recent trends in the housing industry to build a company that serves and is profitable.

Please contact us at the email address or phone number on the front page of this document if you have any questions or concerns. We look forward to the opportunity to work with you in bringing quality, affordable, and responsible homes to everyone.

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Appendix 1: Models for Future Builds

Modern Model Bedrooms: 1Bathrooms: 1Dining Space: 1Living Area: 1Levels: 1Foundation: SlabExterior Style: Beach CottageOutdoor Areas: covered patioRoof: Foam and metalCeiling Height: 9’ Width x Depth: 30' x 26' 10"Square Footage: 600 square feet Design cost: $249 per plan

Great Escape Model Bathrooms: 1Dining Space: 1Living Area: 1Levels: 1Foundation: SlabExterior Style: Beach CottageOutdoor Areas: covered patioRoof: TrussCeiling Height: 9’ Width x Depth: 24' x 20' Square Footage: 480 square feetDesign cost: $249 per plan

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Appendix 2: References

Beracha, E. (2009). When Will Housing Recover? Financial Analysts Journal: American Housing Survey Factsheets, 65(2), 36-47. Retrieved April 24, 2016, from http://www2.census.gov/programs-surveys/ahs/2013/factsheets/ahs13-1_UnitedStates.pdf

Eastham, Kyle (2016). Oklahoma State University, Entrepreneurship and Management graduatestudents shared suggestions.

Foss, J. (2014, August 21). Tiny Houses: Smaller Than Life. Retrieved from http://www.outsideonline.com/1925266/tiny-houses-smaller-life

The Garlinghouse Company. (n.d.). House Plan 52784. Retrieved from https://www.familyhomeplans.com/plan_details.cfm?PlanNumber=52784

The House Plan Site. (n.d.). Studio600: Modern guest house plan D61-600. Retrieved from http://www.thehouseplansite.com/category/under-1000/

Mitchell, R. (2014, July 18). Tiny House Building Codes. Retrieved from http://thetinylife.com/tiny-house-building-codes/

New York: 2010, Population and Housing Unit Counts. (2010). Retrieved from https://www.census.gov/prod/cen2010/cph-2-34.pdf

New York 2010, Summary Population and Housing Characteristics. (2010). Retrieved from https://www.census.gov/prod/cen2010/cph-1-34.pdf

Real Estate - 103 Homes For Sale | Zillow. (n.d.). Retrieved April 24, 2016, from http://www.zillow.com/homes/for_sale/any_days/0-1200_size/globalrelevanceex_sort/42.545239,-76.402188,42.329615,-76.617108_rect/11_zm/

Suter, Tracy (2016). Oklahoma State University, Entrepreneurial Marketing, referenced coursematerials for Marketing section

Very little house on the prairie. (2009, February 19). Retrieved from http://www.economist.com/node/13145388

What Is The Tiny House Movement? (2009, August 31). Retrieved from http://thetinylife.com/what-is-the-tiny-house-movement/

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