LAKEWOOD ACTIVE LIVING
08
Paul Groch, Erin Scott, Robert Wang, and Danielle Wong 1
Pual Groch, Erin Scott, Robert Wang, and Danielle WongJuly 3, 2009
Masters of Professional AccountingUniversity of SaskatchewanMPAcc 809 - Entrepreneurship
MPAcc 809 Business Proposal
LAKEWOOD ACTIVE LIVING
LAKEWOOD ACTIVE LIVING
Table of Contents
Table of Contents......................................................................................................................................................... iList of Figures............................................................................................................................................................... ii
1 Executive Summary...........................................................................................1
2 Business Overview............................................................................................32.1 Introduction..................................................................................................................................................32.2 Mission Statement......................................................................................................................................32.3 Goals and Objectives..................................................................................................................................3
3 Industry Overview.............................................................................................43.1 Background: senior care industry,......................................................................................................4
3.1.1 Highly fragmented market.................................................................................................................... 43.1.2 Competitive market.................................................................................................................................. 4
3.2 Important factors about the industry................................................................................................53.2.1 Age group population.............................................................................................................................. 53.2.2 Per Capita disposable Income.............................................................................................................. 53.2.3 Government legislation and regulations.........................................................................................6
4 Operations Plan.................................................................................................74.1 Incorporation............................................................................................................................................... 74.2 Site Plan.......................................................................................................................................................... 74.3 Floor Plans.....................................................................................................................................................84.4 Building Plan..............................................................................................................................................114.5 Average Day................................................................................................................................................11
4.5.1 Meals............................................................................................................................................................ 114.5.2 Maintenance and Housekeeping......................................................................................................124.5.3 Activities..................................................................................................................................................... 12
4.6 Planned Capital Budget.........................................................................................................................12
5 Human Resources Plan...................................................................................165.1 Organization Structure and Management Team........................................................................165.2 Job Descriptions........................................................................................................................................16
5.2.1 Full Time Staff.......................................................................................................................................... 165.2.2 Part Time Staff......................................................................................................................................... 18
5.3 Wages and Benefits.................................................................................................................................195.4 Training Programs...................................................................................................................................195.5 Human Resources Strategy..................................................................................................................20
6 Marketing plan.................................................................................................216.1 Competitor Analysis...............................................................................................................................226.2 The Marketing Mix (4Ps)......................................................................................................................24
6.2.1 Products and Services........................................................................................................................... 246.2.2 Price.............................................................................................................................................................. 256.2.3 Promotion.................................................................................................................................................. 256.2.4 Place............................................................................................................................................................. 26
6.3 Segmentation, Targeting, Positioning.............................................................................................266.4 Marketing Strategy..................................................................................................................................26
7 Financial Plan...................................................................................................28
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8 References........................................................................................................29
9 Appendix One: average and median senior income.....................................30
10 Appendix Two: median after-tax income among seniors........................31
11 Appendix Three: Sample Meal Plan...........................................................32
List of Figures
Figure 1: Lakewood Active Living Site Plan....................................................................................6
Figure 2: Lakewood Active Living - proximity to competition...............................................7
Figure 3: One Bedroom Suite.................................................................................................................8
Figure 4: Typical Studio Suite................................................................................................................9
Figure 5: Building Plan...........................................................................................................................10
Figure : Organization Chart………………………………………………………………………….……19
Figure 7: Location of Competitors....................................................................................................23
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1 Executive Summary
Lakewood Active Living will be a premier retirement community in Saskatoon,
Saskatchewan, targeting highly educated affluent retirees. This target market will
have a higher income level than the average retiree, in addition to having an
aptitude for challenge and the desire for continued learning. Lakewood Active Living
believes it can fulfill this need for challenge and continued learning, by providing
enriched life experiences to seniors. This will be achieved by pursuing strategies for
innovation, creativity and long term growth in a manner that is sustainable and
secures fair returns for its stakeholders.
Effectively, we want to promote an image of an elite and prominent retirement
community that focuses on technology and learning based opportunities for its
residents, on top of providing superior retirement services. We feel that this is the
next step in the retirement industry that has not be fulfilled by our current
competitors (i.e. local and regional senior care companies, hospitals, nursing homes
and other businesses that provide home health services), as research shows that the
demographics of future residents shows a rising trend in computer and internet
usage.
Lakewood Active Living will lead the retirement industry in being the first to offer a
fully web based retirement community. This includes personal computers in every
room with internet capabilities and web-cameras. This will allow Lakewood Active
Living to attract the more technologically advanced senior by offering a service that
has yet to be offered in any Saskatoon retirement business.
Lakewood Active Living will also offer an environment that promotes continued
learning and active involvement in the community. This will be achieved by offering
our residents with the opportunity to attend information seminars, guest speakers,
computer classes, and other activities that will promote a continued learning based
environment, while stimulating and motivating our clients.
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Lakewood Active Living will be located in the south east end of Saskatoon in the
community development known as Lakewood. Our retirement facility will provide
over 25,000 square feet of living space, accommodating 56 residents in 30 rooms
(one bedroom and studio styles); our average monthly fee will be $2,200.
Part of Lakewood Active Living’s success will be dependent on the active
involvement of management in running the business. Those key management
positions include an Events Manager, Front Desk Manager, Kitchen Manager, and
Maintenance Manager. Each member of Lakewood Active Living’s management
team has strong and superior experience in their respective areas, and has a desire
to see Lakewood Active Living become a success.
Lakewood is a great concept with a strong market argument to support it. After the
initial construction phase of two years, Lakewood will look to fill the rooms with
occupancy rates rising from 65% in the first year to 95% in the fourth year. This
sustainable occupancy rate will yield revenues in excess of $1.6 million per year,
and net income after tax of $200K. This will be paid out to investors in the form of
an annual dividend.
To set up the operations of Lakewood, roughly $2 million is required. This will
finance the acquisition of the land, the construction of the building, the purchase of
fixed assets, as well as cover the initial operating losses incurred before the first
year of operations. Financing will be obtained in the form of a $1.3 million bank
loan secured by the land and building as well as $0.1 million in Management
funding. That leaves a shortfall of $0.6 million, which we will obtain from external
investors in exchange for a 20% controlling interest in the Company.
Overall, the investment will yield an internal rate of return, or return to the investor
of 23.3%.
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Business Overview
1.1 Introduction
Lakewood Active Living will be a premier retirement community in Saskatoon,
Saskatchewan. At Lakewood Active Living, we want to promote an image of an elite
and prominent retirement community that focuses on technology and learning
based opportunities for its residents, on top of providing superior retirement
services. Our two main areas of focus are:
Providing a fully interactive environment through the use of technology.
Providing an environment that promotes continued learning and active
involvement in the community.
1.2 Mission Statement
Lakewood Active Living exists to provide enriched life experiences to seniors by
pursuing strategies for innovation, creativity and long term growth in a manner that
is sustainable and secures fair returns for investors.
1.3 Goals and Objectives
Lakewood Active Living is dedicated to creating and sustaining a superior
retirement residence that enriches the quality of life for seniors who want, and
deserve more.
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2 Industry Overview
The following industry overview will set the stage for which Lakewood Active Living
will be operating in, as well as a basis for a SWOT analysis.
2.1 Background: senior care industry1,2
2.1.1 Highly fragmented market
The senior care industry is highly fragmented due to few barriers to entry and an
increasing market demand. Within the Saskatoon area, there are more than one
hundred small and similar service providers. At Lakewood Active Living, we will
compete with local and regional senior care companies, hospitals, nursing homes
and other businesses that provide home health services. In addition, there are
relatively few barriers to entry in the senior care services markets in which we
operate. Our primary competition comes from local privately owned and hospital-
owned health care providers. We compete based on the active lifestyle that we
provide to our clients; in addition to the quality, expertise and value of our services.
Lakewood Active Living will offer a continuing learning program: we will invite
professors from the University of Saskatchewan and other community colleges to
teach classes, and give seminars on different interesting topics. Furthermore,
Lakewood Active Living will provide transportation services to our residents,
schedule local transportation to various shopping excursions and appointments,
organize outdoor activities, such as berry picking, and to go on tours of the Zoo. Our
goal is to offer an active, healthy, joyful living environment for our residents.
2.1.2 Competitive market
In Saskatoon, there are more than one hundred different retirement businesses that
make up our competition. Due to the nature of the industry, every retirement
community, no matter the location, is considered to be competition. Based on
Canada Mortgage and Housing Corporation’s 2009 Senior Housing Report,
1 Canada Mortgage and Housing Corporation’s 2009 Senior Housing Report2 Statistics Canada, A Portrait of Senior in Canada
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Saskatoon’s average rental price for one bedroom is around $2,000 per month. We
randomly selected 15 competitors and compared their prices, services, locations,
and room availability (Appendix X1). As a summary, the competitors’ prices range
from $1,000 to $2,600 based on the room and service provided; services provided
vary from standard care (accommodation, foods, cleaning) to heavy care (catheter,
diabetic care, registered nursing, 24 hour call); rooms are available from five to
twenty two rooms. Lakewood Active Living will have 30 rooms and is able to
accommodate 56 residents; our average monthly fee will be $2,200.
2.2 Important factors about the industry
2.2.1 Age group population
At the start of this new century, Canada faces significant aging of its population as
the proportion of seniors is increasing more rapidly than all other age groups. In
2001, one Canadian in eight was aged 65 years or over. By 2026, one Canadian in
five will have reached age 65. At end of 2009, 12% of Saskatoon’s total population
(estimated at 234,000) is above age 65, which means that there will be more than
28,000 seniors living in Saskatoon. Furthermore, per Statistics Canada, the aging
population trend will continue further; by the end of 2030, 24.9% of the total
Saskatchewan population will be above the age of 65.
2.2.2 Per Capita disposable Income
Today’s seniors are richer than ever; the financial situation of seniors in Canada
improved significantly over the last 25 years. Between 1980 and 2003, the average
total before-tax income received by senior couples increased from $39,800 to
$49,300, an increase of 24%. Their average total after-tax income increased by 18%,
rising from $36,300 to $42,800. Senior couples at the mid-point of the income
distribution, median after-tax income increased from $27,900 to $36,500, an
increase of $8,600 or 31% (Saskatchewan: $26,500 to 35,600, an increase of 9,100
or 34%). (See Appendix 1 and 2).
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2.2.3 Government legislation and regulations
The senior care industry is subject to extensive government regulation. Any changes
to the laws and regulations governing our business, or the interpretation and
enforcement of those laws or regulations, will cause us to modify our operations and
could negatively impact our results of operations. The laws and regulations
governing our operations regulate how we do business, the services we offer and
impose certain requirements on us relating to:
licensure and certification;
adequacy and quality of health care services;
qualifications of health care and support personnel;
quality of medical equipment;
confidentiality, maintenance and security issues associated with medical
records and claims processing;
operating policies and procedures; and
addition of facilities and services
These laws and regulations, and their interpretations, are subject to frequent
change. Changes in existing laws and regulations, or their interpretations, or the
enactment of new laws or regulations could reduce our profitability by:
increasing our liability;
increasing our administrative and other costs;
increasing or decreasing mandated services; and
forcing us to restructure our relationships with referral sources and
providers.
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3 Operations Plan
3.1 Incorporation
We plan to incorporate Lakewood Active Living due to the following reasons:
1) To ensure that we have limited liability and to receive lower rates for liability
insurance.
2) To allow us to raise funds since lenders and equity investors look favorably
on incorporated companies.
3) To ensure that the business will survive even if the initial owners die or want
to move on.
3.2 Site Plan
Lakewood Active Living will be located in the south east end of Saskatoon in the
community development known as Lakewood, as seen in Figure 1.
Figure 1: Lakewood Active Living Site Plan
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The building will be located on 1 acre of land and will back onto a green space and
nature trial surrounding a pond. Within the community, it will have commercial
shops for residents to walk to as well as numerous green space areas. This residence
will also be situated within one kilometer of Boychuk Drive, which then has easy
access to Taylor Street which is a main thoroughfare in Saskatoon.
As seen in Figure 2, it is the only residence of its kind within a five kilometer radius.
Figure 2: Lakewood Active Living - proximity to competition
The majority of senior residences are located near downtown Saskatoon. This
provides potential residents with the option of a quieter, peaceful setting, yet still
with access to stores, doctor offices and other community members.
3.3 Floor Plans
The Lakewood residence will have two room styles available for residents. Based on
research found in the CMCH Seniors report (2009), the highest vacancy rate for
senior’s residences in Saskatoon are in the bachelor and one bedroom range at
2.7%. Therefore, the majority of rooms within this floor plan are one bedroom
(Figure 3) with a small amount of studio suites (See Figure 4).
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Figure 3: One Bedroom Suite
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Figure 4: Typical Studio Suite
Though rooms will be furnished by Lakewood, residents will be encouraged to bring
their own decorations in order to keep the environment comfortable, familiar and
personal. Everyone will have meals included in their rental payment, but each room
is provided with a sink and small refrigerator to allow for independence.
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3.4 Building Plan
The building will have a layout of 2 floors each with 15 rooms. We believe that
having a small but familiar clientele will allow residents to get to know each other
easier.
Figure 5: Building Plan
3.5 Average Day
3.5.1 Meals
The following will be the meal scheduled followed at Lakewood Active Learning:
8:00 am to 9:30 am – Breakfast will be served
12 pm to 1 pm – Lunch served
5 pm to 7 pm – Dinner served
The Chef and staff will arrive in the kitchen at 6am to begin preparation food for the
upcoming day. The Chef will be required to be present for the entire day and will
have the freedom of devising a menu upon approval of Lakewood management.
Residents will be encouraged to share their ideas about what they would like to see
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on the menu as well as provide recipes to the Chef. Please see Appendix Three for a
sample meal plan.
3.5.2 Maintenance and Housekeeping
Housekeeping will be done between 10 am and 2 pm once a week per room. Each
resident will be informed what day their rooms will be cleaned.
3.5.3 Activities
For the elderly, social pastimes can play a critical role in preserving their physical
and mental health. In fact, a new study suggests that the less time older people
spend engaged in social activity, the faster their motor function tends to decline.
Therefore, each day of the week Lakewood Active Living will provide an assortment
of activities. These activities will have to focus on the three criteria stated in out
mission statement – Health and fitness, well-being and lifelong learning. Therefore,
each week has to have at minimum two activities that cover each category. A listing
of activities as well as an example week schedule is provided.
Monday Tuesday Wednesday Thursday Friday Saturday Sunday
Morning
10 am
Yoga Wii
Games
Sit and be fit Yoga Choir
Practice
Morning
Trip to
Farmer’s
Market
Afternoon
2 pm
Bridge Volunteer
at
Universit
y
Guest
Speaker – U
of S
Tutorial
Improve
compute
r skills
Tai Chi
3.6 Planned Capital Budget
Revenues: We will create revenues through the sale of services and the rental of
rooms within the community. Per individual room, our assisted living program,
including rent, food, and activities, will average $2200 per month.
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Building: The Lakewood building will provide over 25,000 square feet of living
space within a single structure. There will be enough rooms for approximately 56
members, each receiving over 700 square feet of personal living space. The lodge
will have a large, cozy sitting room, a restaurant seating 60 people, a studio with a
raised platform at the front which will provide a venue for yoga and workout classes
as well as guest lectures, a games room and a small ‘private’ room that will be
reserved for meetings or more private dining in case family members come to visit.
Also, the offices for the management team will be located within the lodge.
Furniture: Furniture will be purchased for each of the units and will be replaced as
needed throughout the tenant’s stay. We will also provide each member with a top-
quality computer that will be synchronized with an efficient network that will
enable members to perform research, interact with friends and keep in touch with
daily events. This is in response to the increase in internet usage among seniors.
Rising from 12 percent in 2000 to 37 percent in 2008, we would like to take
advantage of this trend. We will also provide the following furnished areas: kitchen,
dining area, studio, common area and games room.
Also, we will require a large vehicle to transport members when we take them on
excursions outside the community. If there are excursions that require additional
transportation, a bus will be rented using the additional activities fund.
Food Expenses: We will have a strong emphasis on the quality of the food served
at our lodge. Breakfast and lunch will be provided through a buffet format so that
each individual can pick and choose what they prefer. For dinner, this will normally
be served. A budget of $20 per person per day on just the raw materials of food, not
including wages etc., will ensure that we are able to provide the finest quality meals
for all members. We will keep an inventory of approximately $2,000 worth of food
materials at all times, and the restaurant will be open from 6am until 9pm, or longer
for special events. This will allow the cooks to prepare the food for the upcoming
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day as well as have time to clean up. Residents will have access to the dining room
from 7:30 am until 9 pm.
Housekeeping: Lakewood Active Living will employ two full-time employees who
will be responsible for all janitorial and housekeeping duties. It was determined that
full-time employees would be preferred over a contract service due to the
unexpected nature of this type of work. Each housekeeper will be responsible for 15
rooms and will be given approximately 1 ½ hours to clean each. This will include
daily clean-up in the lodge, weekly housekeeping and linen-services for members,
and some outside clean-up if required.
Additional Activities: We will set up guest lectures, excursions to restaurants and
other places of interest, and other similar additional activities and entertainment
events. These will be regulated by a relatively flexible budget of approximately
$3,000 per year per member.
We will form a partnership with the University of Saskatchewan to provide lectures
from various professors on such topics such as health, politics and business. We will
also have guest speakers from the community, such as an art class by Gail Adams
School of Art or a motivational speaker selected from the roster provided by MCP
Speakers.
Miscellaneous: Insurance, outdoor and general building maintenance, and the
supply of utilities will all be provided on a contract basis through reputable outside
sources.
Insurance: Insurance will be purchased for: Liability, theft, fire, commercial auto,
contents in building, business interruption, crime, money/securities, office
equipment, commercial general, errors and admissions, non owners automobile,
bonding employees. Cherry Insurance Company of Saskatoon has provided a quote
for these services for $7,500.
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Developer: We have chosen Dundee Developments to contract and build the
Lakewood Active Living Residence. Dundee is a well-known residential land
developer in Western Canada and brings with them extensive local market
knowledge and experience. Along with construction, Dundee provides land
development operations involving the assembly of raw land parcels, preparation of
planning and engineering designs, securing of necessary municipal approvals,
installation of the development infrastructure (such as roads, sewers and parks) and
implementing architectural controls. The costs associated with Dundee’s services
are included in the cost of the building.
Refer to the Financial Plan for detailed breakdown of capital expenses.
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4 Human Resources Plan
4.1 Organization Structure and Management Team
Lakewood Active Living will operate under the following organizational structure:
Part of Lakewood Active Living’s success will be dependent on the active
involvement of management in running the business. Therefore, management will
consist of a customer relations manager, front desk manager, kitchen manager, and
maintenance manager. These four key positions will sit on the board of directors, in
addition any potential investors who may wish to be a member of the Board. If this
is the case, a majority vote will be required to introduce new board members. The
Board will meet once a week, and all members must be in attendance.
4.2 Job Descriptions
It is important for each staff member of Lakewood Active Living to fulfill its specific
job descriptions and duties.
4.2.1 Full Time Staff
Full time staff will include those with management responsibilities as follows:
Events Manager – Danielle Wong
Danielle has extensive events planning experience, organizing many university
functions, and has previous work experience at a retirement home. She holds a
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Figure 6: Organization Chart
LAKEWOOD ACTIVE LIVING
BComm in accounting and a BA in political science. With her educational
background, she has the ability to organize and build the appropriate relationships
to fulfill Lakewood Active Living’s goal for pursuing strategies for innovation,
creativity and long term growth in a manner that is sustainable. Her responsibilities
include:
Organizing guest lectures, excursions, and activities
Responsible for building and maintaining a relationship with the University
of Saskatchewan and other facilities to coordinate lectures
Ensure overall client satisfaction by addressing any concerns that residents
may have
Promote and create awareness of Lakewood Active Living
Front Desk Manager: Erin Scott
Erin has great organizational skills that she has developed as a previous Nurse and
Accountant. Her background will be a key success factor in this position, as she will
be dealing closely with residents and potential residents. Her knowledge of the
medical arena will be a good demonstration of Lakewood Active Living’s
commitment to providing enriched life experiences to seniors by pursuing
strategies for innovation, creativity and long term growth in a manner that is
sustainable and secures fair returns for investors. As the front desk manager, her
responsibilities include:
Oversee front desk staff scheduling
Deal closely with clients and potential clients
Resolve any problems that might have occurred the previous day
Oversee logistical tasks
Managing the company’s financial operations
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Kitchen Manager: Robert Wang
Robert has a passion for cooking delicious and healthy meals. His attention to detail,
and ability to work in teams are great characteristics that will be key to managing
Lakewood Active Living’s kitchen. Responsibilities include:
Order supplies if needed
Review days inventory
Hire and supervise serving and cooking staff
Update and maintain dining schedule
Maintenance Supervisor: Paul Groch
Paul is a handy man and technical whiz. His background will help ensure Lakewood
Active Living provides an image of an elite and prominent retirement community
that focuses on technology and learning based opportunities for its residents.
Order supplies if needed
Review days inventory
Hire and supervise maintenance staff
Update and maintain cleaning schedule
Provide IT support to residents
4.2.2 Part Time Staff
Part-time employees include front desk staff, cooks, servers, laundry staff,
housekeeping staff, and maintenance/janitorial staff. These positions will require
shift work with a lot of flexibility to accommodate the needs of the employees. Their
responsibilities will include:
Specific job related tasks
Excellent customer service skills
Excellent communication and team work skills
4.3 Wages and Benefits
Management will begin to receive salaries after the construction phase, starting in
2010, with an annual salary of $40,000 and benefits. Part time staff will receive an
hourly wage of $15 / hour and no benefits.
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The cost break down and human resources needs is as follows:
Table 1: Human Resource Needs
Number FT / PT Hours / week
Salary /
Wage Benefits^
Annual Total
Cost
Management Team* 4 FT 40 $40,000 $7,500 $176,000
Front Desk Staff 3 PT 20 $15 $0 $46,800
Cooks 2 PT 20 $15 $0 $31,200
Servers 5 PT 8 $15 $0 $31,200
Housekeeping Staff 3 PT 40 $15 $0 $93,600
Maintenance / Janitorial Staff 1 PT 20 $15 $0 $15,600
Total 18 $394,400
* Management team consists of the Events Manager, Front Desk Manager, Kitchen
Manager, and the Maintenance Manager.
^ Benefits are estimated to be 10% of salary.
` Servers are expected to have 3 shifts per week. Each shift is 4 hours long. There
are 5 servers per shift, and 3 shifts per day.
“ The number of part time staff will vary depending on the number of residents at
LAKEWOOD ACTIVE LIVING. Table 1 assumes full capacity.
4.4 Training Programs
Initial training for all staff members will be provided by the management team, in
addition to having a day to job shadow a more experienced staff. Managers will have
already had experience in their respective areas, and therefore, training will not be
provided. However, an orientation will be provided to all employees by a respective
senior staff member.
4.5 Human Resources Strategy
Lakewood Active Living prides itself in attracting top quality individuals who have a
strong work ethic, exceptional communication skills, and most importantly, superb
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customer service skills. To retain and motivate employees, monthly recognition will
be provided, on top of annual staff appreciation parties. In order to secure honest
and loyal staff at Lakewood Active Living, we will promote an internal marketing
effort towards our staff. Not only do we want to ensure our residents are
comfortable and enjoying their experience at Lakewood Active Living, but also want
our staff to be content in what they are doing. We plan on doing this by offering
competitive wages. Also, we plan to hold weekly meetings for all our employees.
This will allow each employee to have a voice in our company and feel like a part of
the Lakewood Active Living family.
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5 Marketing plan
The retirement living sector within Saskatoon, and Canada in general, is a highly
competitive industry. Seniors have a plethora of retirement living options when
they decide to move onto this chosen path. This is particularly the case in Saskatoon,
as many retirement living businesses offer similar services and products. However,
we believe that Lakewood Active Living will be able to differentiate itself from its
competitors by establishing an interactive forward-looking living environment in
the following ways:
Lakewood Active Living will offer a fully interactive environment through the use of
technology.
Lakewood Active Living will lead the retirement industry in being the first to offer a
fully web based retirement community. This includes personal computers in every
room with internet capabilities and web-cameras. This will allow Lakewood Active
Living to attract the more technologically advanced senior by offering a service that
has yet to be offered in any Saskatoon retirement business.
Lakewood Active Living will offer an environment that promotes continued learning
and active involvement in the community.
At Lakewood Active Living, we are going to offer an intangible benefit to our
residents in the form of continued active involvement. What this means to our
clients is that at Lakewood Active Living, “life does not end.” Society has stereotyped
retirement communities as a nice big apartment type building where mindless
individuals sit around playing chess all day, while talking about the weather. Well
this is not what our target market wants out of their so-called “golden years.” Our
clients are motivated individuals, who want to learn and be involved in what is
happening in society. Thus we are offering them that opportunity at Lakewood
Active Living by allowing our residents to attend information seminars, guest
speakers, and computer classes. We want to promote a continued learning based
environment that will stimulate and motivate our clients.
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Overall, we feel that the current retirement industry and those retirement
businesses in Saskatoon are not adapting to current trends, by accommodating the
demographics of future residents. Research shows that there is a rising trend in
computer and internet usage in the future retirement population. We believe that
Lakewood Active Living can capitalize on this statistic and shortage that has been
created by other businesses in this industry. Lakewood Active Living will also create
an entirely new attitude towards retirement living – an attitude that promotes and
opens the possibilities for the use of technology and continued learning.
5.1 Competitor Analysis
The following chart provides a competitor analysis, indicating who our competitors
are, where they are (see Figure 4) and what their marketing strategies are:
Table 1: Competitor Analysis3,4
Competitor Services Offered PriceRooms
Available Smoking phone
1Ashton Valley Personal Care Home
regular care, House doctor makes call
$1,350 to $1,500 per
month
for 10 people
No smoking (306) 382-8975
1aAmy McClure House
regular care -for 23 people
No smoking (306) 955-7677
2Balicanta Personal Care Home
Catheter, Diabetic care, regular care
$1,200 - $1,500
for 12 people
No smoking (306) 934-5903
3 Quality Care Home regular $2,075 for 10 people
No smoking (306) 651-0231
4Abby Pro Personal Care Home
Diabetic care, Alzheimer care, and regular care
$1,600 per month and
residents pay for their own medications
Rooms for 14 people
to liveNo smoking (306) 242-7904
5 GNE Care HomeCatheter, Diabetic care, regular care
$1000 - $1300
for 12 people
No smoking (306) 382-4944
3 Senior Home Competitors in Saskatoon: http://www.weblocal.ca/map/?lat=52.129266999999999&limit=20&long=-106.670253&place=Saskatoon%2C%20SK&q=nursing%20home#senior%20home|||Saskatoon%2C%20SK|||||||||14 Retirement Homes in Saskatoon: http://www.weblocal.ca/map/?lat=52.129266999999999&limit=20&long=-106.670253&place=Saskatoon%2C%20SK&q=nursing%20home#retirement%20home|||Saskatoon%2C%20SK|||||||||1
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Competitor Services Offered PriceRooms
Available Smoking phone
6The Palisades Intermediate Care Home
Support services are provided under contract by LutherCare Communities
- 22 rooms No smoking (306) 653-3998
7Greystone Personal Care Home
regular care$1600 per
month
for 5 people (female
only)
No smoking (306) 955-0253
8Arbor Villa Care Home
regular care -
for 13 people (female
only)
No smoking (306) 249-3317
9Luther Intermediate Care Home
Participation in activities with other LutherCare Communities buildings
$2,600 per month
for 15 people
No smoking (306) 664-0390
10M&M Private Care Home
Diabetic care, and regular care
$1200-$1600/month
for 12 people
Smoking is allowed out
of doors(306) 242-6501
11Maria's Personal Care Home
Dementia care, regular, Philippine spoken
$1500.00 per month
for 8 people
No smoking (306) 249-0937
12311 Silverwood Care Home
Diabetic care and regular care, house doctor
$1,000 5 rooms No smoking (306) 384-3315
13A Ray of Sunshine Care Home
Staff speak English and Tagalog
$1875/monthfor 10 people
Smoking is allowed out
of doors(306) 652-2118
14Villa Royale Perosnal Care Home
regular - - - (306) 978-3098
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Figure 7: Location of Competitors
Based on our competitor analysis, we feel that Lakewood Active Living can provide
something that our competitors cannot – an enriched life experience to seniors by
pursuing strategies for innovation, creativity and long term growth in a manner that
is sustainable and secures fair returns for investors.
5.2 The Marketing Mix (4Ps)
5.2.1 Products and ServicesLakewood Active Living will offer a number of services common in retirement
businesses that range from dining room services to laundry services. What will
differentiate Lakewood Active Living as mentioned before is the technology based
and interactive living environment. These two aspects of Lakewood Active Living
are very important as these services will set it apart from its competition. As
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mentioned above, we will have staff devoted to making Lakewood Active Living an
interactive hub for our clients, which will allow them to explore many educational
and informative sessions. Guest speakers will be brought in, and constant
information will be provided to our residents about community events, seminars,
travel possibilities, and numerous other activities and events. By offering these
services, we want to emphasize the ability for our residents to experience a fulfilling
and mind stimulating stay at Lakewood Active Living.
5.2.2 PriceLakewood Active Living is a superior and exclusive retirement living campus
directed to educationally affluent individuals. As such, Lakewood Active Living is
priced competitively with other upper end retirement businesses within the city
and our prices will average around $2,200 / month, depending on the service plan
that our client desires. Even though our prices will be on the higher end, it will not
affect our demand as we feel our clients will not be looking at just the price, but
rather the intangible benefits that accompany our services.
5.2.3 PromotionLakewood Active Living will provide an image of a retirement community where
individuals can take part in a technology based, interactive learning environment -
an environment where retirees can continue to be stimulated and grow as
individuals. We want to focus on the mental and emotional aspects of our clients,
not simply the aesthetics of a retirement community. The promotion of Lakewood
Active Living will be through a few different mediums. We want people to know
about our competencies and intangible benefits of Lakewood Active Living, and we
feel the best way to promote this message is through personal selling. Specifically,
we feel that our management team can play a major role in this, as our target market
can be found within our network of contacts. We will also promote Lakewood Active
Living through mediums such as flyers and brochures. These promotional items will
be mailed out to potential clients and will also be distributed to companies who
have employees that meet our target market. Also, we want to involve real estate
agents and formally educate them on the benefits of Lakewood Active Living. This
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way, these real estate agents will have the necessary knowledge to inform its clients
of Lakewood Active Living’s benefits. Additionally, Lakewood Active Living will also
target its promotional activities towards the family and relatives of potential clients,
to inform them about the benefits of our facility to our clients and to them.
5.2.4 PlaceAs noted throughout this plan and within the operations section, Lakewood Active
Living will be situated in the south east end of Saskatoon in the community
development known as Lakewood. Lakewood Active Living will be targeted towards
highly educated affluent individuals who will be targeted through the networks of
those on the management team (word of mouth), promotional activities, and
advertising.
5.3 Segmentation, Targeting, PositioningLakewood Active Living will focus on the highly educated affluent retirees in
Saskatoon. These individuals will normally be university-educated individuals who
have had successful careers in their life. Lakewood Active Living will target those
individuals entering the retirement stage of their life (~mid 50s) who still have an
aptitude for challenge and the desire to continue learning. As these individuals will
have typically have led prominent careers, we want to focus on those who are
familiar and desire to continue the use of technology in their life. We want to
provide an image of an elite and prominent retirement community that focuses on
technology and learning based opportunities for its residents.
5.4 Marketing StrategyAt Lakewood Active Living, we want to promote an image of an elite and prominent
retirement community that focuses on technology and learning based opportunities
for its residents. We want to achieve this by targeting our potential clients and
providing them with as many opportunities to get to know the benefits of Lakewood
Active Living. This will be achieved by providing a tour of the facility, showing the
potential resident all of the services we offer and the benefits associated with them.
Potential residents will also have the opportunity to talk to other residents to find
out first hand what the Lakewood Active Living experience is all about.
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Lakewood Active Living will also target its marketing strategy to the most important
people surrounding the client – their family and friends. We feel that everyone
should be a part of the retirement process. Thus we also will stress the benefits that
Lakewood Active Living has to offer to the whole family. These include making visits
easier and more fun by having guest suites for the resident’s families, and offering
activities that visitors can enjoy alongside our client. It is essential that we stress to
all parties involved that the decision to move into Lakewood Active Living is
beneficial to everyone.
Overall, we feel that our marketing strategy will demonstrate the true benefits of
Lakewood Active Living. At Lakewood Active Living, our clients will be able to find a
place where they can enjoy retirement in a social and mind-stimulating
environment. Not only will Lakewood Active Living provide all the aesthetics that
any other retirement community would provide, but Lakewood Active Living will
also provide an environment that will fulfill the mental and emotional aspects that
our residents need. Specifically, the technology based environment, and continued
learning aspect will fulfill this need, allowing our residents to challenge themselves
and grow as independent individuals. The option of learning will allow residents to
explore new frontiers that they may not have had the time for earlier in their lives.
Moreover, our customer relations’ director will also focus on organizing additional
activities that will fulfill this need of our residents. Activities such as helping out in
food drives, or providing mentorship to troubled teens will fulfill this need.
Also, with our focus on a technology friendly environment, Lakewood Active Living
will provide the opportunity for increased communication with family – particularly
for those residents that have children and grandchildren. The new generation of
society is technology oriented, and communication has shifted heavily towards the
use of email and instant messaging. Accordingly, our residents will have 24-hour
access to the Internet, where they can e-mail loved ones, or even take part in online
web cam conversations.
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6 Financial Plan
The financial plan includes a seven year projection, which includes a two year construction period, of income statement, retained earnings, balance sheet, and cash flow. The financial statements have been displayed in appendix’s two, three, four, and five. The estimates, as summarized in appendix one, have been derived from the following:
Revenue estimates from the marketing plan.
Operating expenses and capital budget from the operations plan.
Wages and salaries from the human resources plan.
Economic Forecast:
The growth in the rental price has been assumed to be the same as inflation, which as displayed in appendix one is set at a rate of 3% per year. The economic forecast is also based on the completion of the construction of the facility by the end of 2010 with residents being able to move in at the start of 2011. Due to our advertising during 2009 and 2010, the continued aging population, and low vacancy rates for retirement communities in Saskatoon, we have forecasted our occupancy rates an average of 65% in 2011, 80% in 2012, and 95% in 2013. Given the current levels of vacancy rates, we believe that 95% occupancy will be reflective of our future operations.
Working Capital Estimates:
Accounts Receivable
At Lakewood Active Living, we will obtain direct withdrawal information from our residents. During the application process, this information will be collected from the potential resident and confirmed with the related bank, prior to the resident being accepted to Lakewood. The payment for the residence will be at the start of each month and we will extend credit terms of net 30 days. For overdue accounts, we will follow up with the resident and try to work out an arrangement that does not result in an eviction. However, in the unfortunate circumstance and as a last resort, we will evict the resident from the residence.
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Financing Budget:
To finance the business, we are looking to secure $600,000 in investor funds to go along with $100,000 in Management funds and a $1.3 million bank loan. The investor funds will be used in the first year to purchase the land and begin construction of the building. The $1.3 million bank loan will be drawn on during the second year of operations and used to pay the remaining cost of construction as well as purchase the equipment and capital assets required to operate the business. The following table summarizes the financing plan:
Breakdown of Total Financing Required
The following table outlays the total financing required.
Investor Financing
Under the financing plan, the investor would receive Class B common shares with a total of a 20% controlling interest in the Company. Management would receive Class A common shares with an 80% controlling interest in the Company.
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Dividend Policy:
Although there is adequate cash on hand to pay dividends in the first year of operations, the business will distribute dividends when retained earnings are in a positive position. This will allow the Company to pay down debt before issuing dividends. Any balance that exceeds positive retained earnings will distribute dividends up to $200,000 per year. The business will start distributing dividend in the fourth year of operations being 2014 where $150,000 in dividends will be paid out. The annual maximum of $200,000 will be paid out on each subsequent year. Dividends will be distributed based on the controlling interest in the organization.
Bank Loan:
Currently the PRIME rate is set at 5% and we have set our borrowing rate at fixed rate of PRIME plus 1%, being 6%. To finance the purchase of the land, the construction of the building, purchase of equipment, and to fund initial operating shortfalls, we will be borrowing $1.3 million. The debt would ordinarily be amortized over a twenty year period; however, due to the strong cash flows generated in the initial years of operations, we have elected to pay down the debt principal balance on a faster than required basis. Please refer to appendix eight for a copy of the debt amortization schedule. Under the current model, we forecast that the debt will be repaid after ten years.
Corporate Income Taxes
In order to be eligible for the small business deduction, our business needs to be a Canadian Controller Corporation and the business needs to have active business income. Under our forecast, the majority of the Company is controlled by Canadian’s residents. Therefore, we are forecasting taxes based on the small business deduction rate of 16%. Any amount in excess of the $500,000 threshold would be taxed at the 30% threshold.
Ratio Analysis:
As outlined in appendix nine, we have calculated the key profitability ratios, solvency ratios, and investment utilization ratios. The key highlights, once the business is established and past the start up phase are:
Sustainable gross margin of 22.6% per year
Return on assets of 8.5% to 12%
A return on equity of 23% to 28.5%
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The debt to equity ratio decreases at a strong rate as due to the strong cash flows generated from operations and debt repayment plan. Along with the decrease debt to equity ratio is an increased interest coverage, implying that our Company will be able to meet loan repayment requirements.
Management Information System:
Throughout the course of the year, Management will meet frequently to review the operations of the Company and assess if budgets and policies are being adhered to. This will allow us to follow up on past due accounts, maximize occupancy rates, compare costs and revenues to budgets and deal with resident concerns.
On a monthly basis, Management will meet to address the following:
Accounts receivable balances exceeding 30 days.
Changes in occupancy rates
Resident concerns
Monthly financial statements vs. budgets
On a quarterly basis and annual basis, the following information will be submitted to the Bank and to investors:
Quarterly / Annual financial statements
Summary of operations for the quarter including occupancy rates, market trends
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Financial Analysis:
Based on the net present value calculation performed as per appendix ten, the Company will generate positive cash flows in its first year of post construction operations with annual cash flows in excess of $300,000 once occupancy reaches 95%. In the first two years, due to the acquisition of land, construction and start-up costs, the Company will incur a total of $2 million in negative cash flows.
Based on the above mentioned cash flows, the net present value of the investment opportunity was calculated using the weighted average cost of capital approach. In this scenario, we’ve assumed that the optimal debt to equity structure is $1.3 million in debt and $0.7 million in equity financing. Due to the collateral available in the form of the land and building, it will be likely to attain such a structure. As calculated in appendix ten, the weighted average cost of capital is 10.3%, assuming a desired return on equity of 20%. Considering this as a moderately risky business, the required rate of return has been taken as 20%. Overall, the investment will yield an internal rate of return of 23.3%.
Risk Analysis:
For analysing the risk of this business, some critical factors have been identified, which can either boost or adversely affect the business. The following are these critical factors.
Occupancy rates
Interest rate
To mitigate the risk of low occupancy rates in the first years of operations, we will be undertaking a marketing strategy during the constructions phase as suggested in the marketing plan. As for the interest rate, we are looking to lock in a fixed rate of 6% since rates are currently historically low. Furthermore, we are looking to repay the debt as soon as possible to maximize the potential returns to the investor.
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Scenario Analysis:
We have performed a scenario analysis based on the base case, best case, and worst case scenarios by varying the key revenue and cost drivers. The results are shown in appendix eleven. Under the worst case, the internal rate of return drops to negative 0.7%. In the best case, the internal rate of return of 38.7%.
Breakeven Analysis:
To calculate the breakeven point, we focused our calculation on the key revenue driver, being occupancy rates. Under the break even analysis, the Company would need to maintain an occupancy rate of 75%. Any occupancy level below this would result in a negative NPV. At 75%, the internal rate of return is calculated as 11%.
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7 References
Canada Mortgage and Housing Corporation’s 2009 Senior Housing Report
Statistics Canada, A Portrait of Senior in Canada
Statistics Canada, Survey of Consumer Finances; Survey of Labour and Income Dynamics.
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8 Appendix One: average and median senior income
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9 Appendix Two: median after-tax income among seniors
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