LLC.

http://nutrifilter.weebly.com/
4369 Broad St.
Baltimore, MD 21117
555-555-5555

Fall 2016
Authored By:
CEO Jessica Boyer
CFO David Pepe
COO Annie Archibald
CMO Haley Albert
CTO Kwabs Frimpong
TABLE OF CONTENTS

The Executive Summary ........................................................................................... 1

1.0 The Company, Concept, and Products and Services........................................... 5

1.1 The Company and the Concept ..................................................................... 5

1.2 The Product ................................................................................................ 6

1.3 Entry and Growth Strategy ........................................................................... 7

2.0 The Industry Analysis ...................................................................................... 8

2.1 Product Industry ......................................................................................... 8

2.2 Industry Size and Annual Growth Rate .......................................................... 8

2.3 Current Industry Structure ............................................................................ 9

2.4 Key Trends in the Industry....10

2.5 Key Success Factors in the Industry..10

2.6 Standard Financial Ratios for the Industry Structure .....11

3.0 Market Research and Analysis .........................................................................12

3.1 Relevant Market and Customer Overview......................................................12

3.2 Market Size and Trends ...............................................................................13

3.3 Buyer Behavior ...........................................................................................14

3.4 Market Segmentation and Targeting .............................................................15

3.5 Competition and Competitive Edges .............................................................16

3.6 Estimated Market Share and Sales ...............................................................17

3.7 Ongoing Market Evaluation .............................................................................18

4.0 Business Economics .......................................................................................19

4.1 Revenue Drivers and Profit Margins ..............................................................20

4.2 Fixed and Variable Costs..............................................................................20

4.3 Operating Leverage .....................................................................................20

 4.4 Start-Up Costs ............................................................................................21

4.5 Overall Economic Model...............................................................................21

4.6 Breakeven Analysis ....................................................................................22

4.7 Profit Durability ...........................................................................................22

5.0 The Marketing Plan ........................................................................................23

5.1 Overall Marketing Strategy ..........................................................................23

5.2 Pricing ........................................................................................................24

5.3 Selling Cycle ...............................................................................................25

5.4 Sales Tactics, Advertising, Sales Promotions, Publicity ..................................26

5.5 Customer Service, Warranty, Guarantee Policies ..........................................26

5.6 Distribution .................................................................................................27

6.0 Design and Development Plan ........................................................................29

6.1 Development Status and Tasks ....................................................................30

6.2 Difficulties and Risks ...................................................................................30

6.3 Product Improvements and New Products ...................................................31

6.4 Projected Development Costs ......................................................................31

6.5 Proprietary Issues and Intellectual Property ..................................................31

7.0 Operations Plan .............................................................................................32

7.1 Operations Strategy, Operating Model and Cycle ...........................................32

7.2 Geographic Location and Physical Location Requirements .............................32

7.3 Facilities, Improvements and Equipment Requirements ................................32

7.4 Capacity Levels and Inventory Management ................................................34

7.5 Legal Issues Affecting Operations ................................................................34

8.0 The Management Team ................................................................................. 35

8.1 Organization ............................................................................................... 35

 8.2 Key Management Personnel ........................................................................ 35

8.3 Management Compensation and Ownership ................................................. 37

8.4 Other Current Investors .............................................................................. 37

8.5 Employment and Other Agreements, Options and Bonus Plans ....................... 37

8.6 Board of Advisors ....................................................................................... 38

8.7 Other Shareholders, Rights and Restrictions ......................... 39

8.8 Supporting Professional Advisors and Services ............................................... 39

9.0 Overall Schedule ............................................................................................ 40

10.0 Assumptions and Critical Risks ..................................................................... 45

10.1 Key Assumptions ........................................................................................ 45

10.2 Potential Risks ......................................................................................... 46

10.3 Addressing the Risks................................................ 47

11.0 Financial Plan ............................................................................................. 48

11.1 Highlights of the Financial Statements ......................................................... 48

11.2 Cost Controls ........................................................................................... 48

12.0 Proposed Company Offering ........................................................................ 50

12.1 Desired Financing .................................................................................... 50

12.2 Offering ................................................................................................... 50

12.3 Capitalization............................................................................................ 50

12.4 Use of Funds ....................................................................................... 51

12.5 Investors Return ....................................................................................... 51

13.0 Annotated Bibliography ............................................................................... 52

14.0 Appendix ................................................................................................... 54

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EXECUTIVE SUMMARY
More than 100 million Americansone-third of the U.S. populationare afflicted
with at least one skin disease, ranging from acne to melanoma (PhRMA, 2011). As the
bodys largest and fastest-growing organ, the skin functions as an outer layer of
protectionand endures a lot. The health and vitality of this protective organ is often
taken for granted reinforcing that the most redundant skincare issue among individuals
is neglect. Whether this is because the beauty industry has created the false perception
of skincare being a luxury rather than a necessity or because individuals dont fully
understand the importance of a proper skincare regime, we owe it to ourselves to
return the favor. NutriFilter has made it a priority to give back the care and sustenance
that our skin has given to us by offering individuals a daily regimen that will turn
skincare into a second nature alongside of taking a shower. Requiring no extra time or
commitment than a normal shower routine, NutriFilter has made it possible to transmit
the essential vitamins, minerals, and supplements onto the skin through a specialized
showerhead and cartridge dispensing system. NutriFilter has taken it upon themselves
to disrupt the skincare industry with their revolutionary showerhead product adapting to
the growing trend for a healthier lifestyle.
NutriFilter is a multipurpose showerhead that offers daily health and cosmetic
benefits to the skin by dispensing the essential vitamins, minerals, and supplements in
the ultimate shower experience. Operating as an LLC in the U.S Cosmeceutical Skincare
Production industry, NutriFilter focuses on two long-term goals. Those goals are to
provide a quality product that combats the transparent need for a natural, multipurpose
and convenient solution to routine skincare and to improve the health and physical
appearance of its consumers. With this industry growth forecasted at a 5-7% annual
rate over the next five years, NutriFilter is looking at an industry with promising
potential. Despite its smaller size and vulnerability of entering a highly-concentrated
market against major competitors like Procter & Gamble and Unilever, NutriFilter will
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make its way into the market by responding to the need for specialty brands and high
end skincare products that the current industry giants are struggling to tap into.
Given the moderate barriers to entry of this industry, NutriFilter aims to stand
out from competitors on the basis of quality, convenience, ingredients and new product
development. With the level of competition in the Cosmeceutical Skincare Production
industry rising, competition will be inevitable. However, when comparing generic
products labeled as cosmeceuticals with original premium brand cosmeceutical products
like NutriFilter, consumers will be more inclined to purchase NutriFilter based on the
competitive advantages it offers.
With a market size of 55 million Americans, NutriFilter will target men and
women, ages 35 who possess moderate disposable income. This market is expected to
grow by 6.4% over the next three years as consumers begin moving towards healthier
lifestyle trends. Product awareness will be generated initially through social media
platforms driving traffic to the NutriFilter website. After the first year of sales, NutriFilter
will carry over marketing efforts to national retailers, integrating a variety of advertising
and promotional efforts with these retailers to continuing building awareness of the
product and brand.
NutriFilter has designed a showerhead that will dispense specific vitamin, mineral
and antioxidants through the flow of water and onto the skin. By distilling a
combination of all- natural vitamin, mineral and antioxidant ingredients into cartridges
scientifically formulated to protect, enrich, and prolong aging, NutriFilter will
revolutionize the way individuals maintain the health and appearance of maturing skin.
Founded by five Syracuse University alumni, NutriFilter is comprised of a diverse
and knowledgeable management team with a blend of accounting, finance, marketing,
entrepreneurship, and supply chain management concentrations. All five executives are
experts in their respective fields and have had a strong foundation of business from
previous employers. NutriFilters well-rounded team is more than qualified to leverage
development and growth of the company.
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The startup cost that NutriFilter will incur includes R&D, office equipment,
licensing fees, marketing expenses, e-commerce, and web development. Variable costs
will constitute $16.05 per showerhead attachment and $6.20 per ten pack of mineral
cartridges. NutriFilters fixed cost structure will incur most of the expenses, yielding a
higher operating leverage and contribution margin as outsourcing and production will
be the few variable costs accounted for by the company. Online sales and national
retailers with be the companys key revenue drivers. For the first fiscal year, NutriFilters
online sales will account for 100% of the revenue stream. Sales from national retailers
will withhold until the second fiscal year generating an initial 42% of the revenue
stream increasing to approximately 48% over the next three to five years leaving the
remaining 52% to be generated from online sales. NutriFilter anticipates that the
demand for showerheads will steadily decrease to 40% of total sales whereas the
demand for the mineral cartridges will counteractively grow to 60% of total sales.
NutriFilter will see a spike in revenue in its second year due to a projected
agreement with a national retail chain. NutriFilter anticipates retaining 55% of the
revenue generated from these retailers. In the second quarter of year three, NutriFilter
forecasts breaking even at $1,148,910 in sales revenue.
At the end of year 2019, NutriFilter should be generating a profit of just over
$430,000 upholding a steady 6% rate of sales growth past year five to accrue a profit
of just over $5.6 million. NutriFilter will relocate to a larger office in their second year in
the same city, which will increase the expense requirements for rent. NutriFilters
founders also intend to raise their salaries in the companys fourth year of operations by
$5,000 each, to a total of $40,000 per person. The founders will only do so barring the
financial stability of the company.
Total startup capital requirements accrue to about $400,000. NutriFilter founders
will contribute a total of $100,000. The remaining $300,000 must come from outside
angel investors. NutriFilter is offering a 30% equity stake and four seats on the Board
of Advisors for those willing to invest. In 2020 these investors can expect their
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$300,000 investment to be subject to a 4.66x rate of return which will equal to a return
of $1,400,000 at the end of year six.
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1.0 THE COMPANY, CONCEPT & PRODUCT

1.1 THE COMPANY AND THE CONCEPT:

More than one-third of the U.S. population suffers from at least one skin condition
(PHRMA, 2013). Many individuals are faced with the daily struggle of maintaining their
physical appearance, health, and wellness. Consumers have expressed the desire to
always look and feel their best self. Unfortunately, natural processes, such as aging,
hinder the amount of control that consumers have over their well-being. For this
reason, consumers rely on the use of supplements, vitamins, and nutrients to grasp
control of their ever-changing bodies. NutriFilter has developed a revolutionary product
that will seamlessly transform an everyday shower routine into a rewarding shower
experience. The showering experience will effectively deliver the essential nutrients,
which millions of individuals perceive to be beneficial. Combining two daily routines will
ultimately strengthen the skin and replenish deficiencies that enhance physical
appearance and wellness.

The mission of NutriFilter is to provide consumers with a natural and convenient

solution to enrich and maintain a healthy lifestyle. NutriFilter further provides value to
the customer by offering customizable cartridge packs that will cater to each customer
individually based on skin conditions they are looking to address. Given that the skin
naturally absorbs sixty percent of the substances (Fox, 1984) that it comes into contact
with, NutriFilter will combat these conditions, by providing the proper vitamins, through
ones daily bathing routine.

NutriFilter has made the decision to become a Limited Liability Company within the
state of Maryland. This will allow the organization to be more accessible and better able
to serve target customers. The decision is based upon the fact that being an LLC has
protective benefits to the founding members of this company, as well as having pass-
through taxation, which will allow the founding business partners to report the taxes at
the individual level. As an LLC the founding members of this company will have more
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flexibility to manage crucial business decisions than if it had been established as a

corporation.

1.2 THE PRODUCT

NutriFilter is a unique showerhead, with a built-in cartridge dispensing system that

infuses the most sought-after vitamins into the water stream.

The cartridges will be filled with mixes of essential minerals and vitamins chosen by
consumers to meet their daily, and seasonal, needs. There will be a variety of cartridge
options for the consumer to choose from including, but not limited to, the following:

Vitamin A Slows skin aging

Vitamin B3 Boost hydration to reduce redness

Vitamin C Smooth and firm skin, sun spots

Vitamin E Moisturizes, protects against UV rays

Vitamin K Reduces swelling and bruising

Source: (Prevention, 2013)

These vitamins and minerals will be infused into the water supply to achieve the desired
consumer experience. NutriFilter plans to outsource the manufacturing of the
showerheads, cartridges, and raw materials to allow the company to be more agile and
liquid with their limited funds.

In the ideation phase the management team has identified areas for expansion, and
opportunities to capture more market share from competitors. Such areas of expansion
can, and may include, sink filters, handheld showerheads, bathtub faucets, drinkable
solutions, and pool filters. With the initial showerhead product, and these additional
product add-ons, the company expects to rapidly acquire a stable footing within the
first 5 years.
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1.3 ENTRY AND GROWTH STRATEGY:

The companys plan for entry and growth will be a key attribute to success within this
competitive industry. NutriFilter will test the cartridge mixes on a few subjects to
determine which cartridge combinations will achieve the highest quality of skincare
results. Once this is determined, NutriFilter will begin to sell the product to local
retailers such as Bed Bath & Beyond, Home Depot, Wal-Mart, and Target. Within five
years, the management team expects the product to be distributed on a national scale.
NutriFilter intends to look into ways to protect innovation rights over the successful
cartridge offerings, mixes, and combinations.
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2.0 THE INDUSTRY ANALYSIS

2.1 PRODUCT INDUSTRY:
Our revolutionary cartridge dispensing system would fit most appropriately under the
U.S Cosmeceutical Skincare Production industry in the Personal Health Care sector.
It will address particular skincare needs and become an alternative solution to products
that are currently being used to improve personal health and skincare. IBISWorld
describes the targeted industry as follows:

Companies in this industry manufacture cosmeceuticals, which are cosmetics

with pharmaceutical capabilities. Some of the most popular products include
wrinkle-reducing moisturizers and creams that even skin tone. This industry does
not include doctor-prescribed or administered cosmetic enhancements [e.g
wrinkle-reducing injections] (IBISWorld, 2015).

NutriFilter fits into this sector because the product is not a necessary requirement for
consumers lives, but it provides a distinct benefit to consumers with interests in
nutrition and personal skincare maintenance.

2.2 INDUSTRY SIZE AND ANNUAL GROWTH RATE

According to IBISWorld, the revenue of the Cosmeceutical Skincare Production Industry
was $5.9 billion (USD) as of October 2015 (2015). The Annual Growth Rate from 2010-
2015 was 10%, whereas the Annual Growth Rate from 2015-2020 is projected to be
6.4%. At this rate, total revenue in the industry would increase by $2.1 billion, to a total
of $8.0 billion by the year 2020. The development of the business will directly benefit
from this year-to-year growth. As of 2015, there were 245 businesses within the
Cosmeceutical Skincare Production Industry. The number of industry companies is
expected to increase at an average annual rate of 3.9% during the five years ending in
2015 (GlobalMNA, 2015). PRWeb Newswire states, "...steadily rising per capita
disposable income will support growth in consumer demand, while new product
introductions will tap into a younger market base seeking preventative measures
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(Smith, 2016). However, imports are forecasted to outpace revenue growth. Therefore,
foreign-made goods will satisfy domestic demand, limiting the domestic industry's
growth prospects.

2.3 CURRENT INDUSTRY STRUCTURE

As previously discussed, the industry has been growing consistently over the last half
decade with expected growth still to come. The major players in the industry are
LOreal SA, The Procter & Gamble Company, and Unilever. Each of these competitors
within the industry hold between 15-25% market share. Products within this industry
maintain a short product life cycle due to technological advancements. Understanding
the barriers to entry will aid in the success and strategic planning for entering this
industry. The barriers to entry include:

Concentration HIGH
Life Cycle Stage: Growth
Capital Intensity: Medium
Technology
Medium
Change:
Regulation &
Medium
Policy:
Industry
Medium
Assistance:
Competition: Medium
(IBISWorld, 2015)

Further breaking down competition between the big three companies is focused on
product differentiation in order to gain market share. However, the cost of switching to
alternative products is low, which makes competition to gain repeat customers high
amongst big companies. Through active research, the company has identified that 28%
of the target market claims to always buy the same beauty brands (Skelley, 2015).
The pricing of these cosmeceutical products can also be a key differentiator between
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companies; it should be noted that products within this industry come at a premium
price due to their high quality. To maintain a competitive edge, companies must
continue research and development at a steady rate. External competition is low due to
the fact that there is an ongoing need for personal hygiene.

2.4 KEY TRENDS IN THE INDUSTRY

Profit margins tend to be high in this industry due to the willingness to spend on high
quality products. Competition is likely to grow over the next few years as more players
continue to penetrate the market. It is possible that this industry may reach its
saturation point in the next five years, however revenue growth is projected to steadily
increase. Imports are predicted to outpace revenue growth because of the appreciation
of the US dollar, which will reduce the cost of foreign products (IBISWorld, 2015).
Therefore, foreign-made products will start to take up a bigger share of the US market,
which could limit domestic growth. Due to these trends, our company has chosen to
outsource manufacturing to compete with the successful industry giants and to gain
revenue traction in our growing years. NutriFilter will produce our cartridge mixes
domestically to protect the ingredients of our product and to appeal to the American
public by creating jobs and supporting the domestic economy. According to IBIS World,
the rising demand for green products will provide opportunities for niche players, like
NutriFilter, who differentiate themselves by only using natural and organic ingredients.

2.5 KEY SUCCESS FACTORS IN INDUSTRY

Since products within this industry come at a premium price the amount of disposable
income saturating a countrys economy is key. People with higher levels of disposable
income are more likely to spend on discretionary products. Income is expected to rise in
the next few years, which represents another opportunity for NutriFilter. Research and
development is a major contributing factor to success; which has, in turn, prompted
companies to invest more money into this area of the business. The demand for
environmentally safe products is becoming increasingly more important with each
passing year. Therefore, expenditure on research and development into
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environmentally beneficial characteristics has been growing. The international value of

the US dollar may incent consumers to purchase the more affordable imported products
rather than domestic products. This is a threat to the industry because it can restrict
revenue growth. Having a steady source of raw materials can have a material impact on
a market players performance due to a recent shortage of key cosmetic inputs.
Manufacturers must be able to create products that match the trends set by the
market, or the major market players, in order to be successful within the industry.
Being able to develop and implement a strong marketing campaign will be a pivotal
factor in the companys success due to the competitive nature between the four big
market leaders.

2.6 STANDARD FINANCIAL RATIOS FOR THE INDUSTRY STRUCTURE

Labor is very important as laborers
Labor Demand are needed for R&D, Administrative
tasks, inspection and quality control
Average Wage compared 13.12%
to Revenue

Percentage of Profitability 19%

compared to Revenue

Average Cost of Marketing

8%
compared to Revenue
Purchases compared to
45%
Revenue
(IBISWorld, 2015)
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3.0 MARKET RESEARCH & ANALYSIS

3.1 RELEVANT MARKET AND CUSTOMER OVERVIEW:

The overall definition of the market can be defined as the Global Bath and Shower
Market, targeting consumers ages 35, and up with moderate levels of disposable
income. These individuals are looking for a more natural and convenient solution to
keep their skin looking and feeling healthier as they age.

NutriFilters customer demographics will consist of both men and women. NutriFilter
intends to offer a unisex product, and statistics have shown that there has been an
increase in the number of men and women reporting they are concerned with the
effects of aging (NIA & NIH, 2015). Women are more actively seeking skin care
solutions on a regular basis than men, however, an Estee Launder article in the New
York Times claims that across all brands, mens skin care has been growing globally at
an annual rate of 9% (Friedman, 2014).

Skincare and aging have a high correlation making age a significant factor of the ideal
customer profile. According to the National Institute on Aging, Skin changes with age.
It becomes thinner, loses fat, and no longer looks as plump and smooth as it once did.
Your veins and bones can be seen more easily. Scratches, cuts, or bumps can take
longer to heal. Years of sun tanning or being out in the sunlight for a long time may
lead to wrinkles, dryness, age spots, and even cancer (NIA & NIH, 2015). NutriFilter
expects the target age group to be, middle aged and older, men and women,
approximately age 35 and up. Statistics have shown that this age segment is also more
likely to have a high level of disposable income, which is another demographic the
company is capitalizing on to distinguish the target market (NIA & NIH, 2015).
Additionally, the targeted geographic location will initially be confined within the U.S.,
and depending on statistics and data, will be focused more heavily on specific regions.
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3.2 MARKET SIZE AND TRENDS

The companys market size of 55 million Americans is a figure that represents the
current population of both men and women, ages 35 and up, who make the national
average, or above average, household income. Among this group, NutriFilter estimates
that one-third have a treatable skin condition.

The aging population in the U.S. will likely have the greatest influence and result in an
overall expansion of the market. As a result of increased life expectancy, consumers are
forced to address their long-term health at an earlier age. In the future, NutriFilter will
develop a strategy catering to younger consumers to capitalize on this growing trend.
According to an article from the National Retail Federation, consumers are bent on
maximizing their well-being and are becoming more intentional about the products they
buy Well-being is viewed more by consumers as something thats achievable,
(Clurman, 2015).

NutriFilter is one of many retailers tapping into this rising trend of consumers trying to
live a healthy lifestyle. A variety of data and statistics pulled from Mintel reports visibly
support this claim. One source estimates that 69% of women 18+ take a vitamin,
mineral, or supplement to manage their health (Mintel, 2015). This highlights a general
consensus of the need for the NutriFilter showerhead among American women. Mintels
August 2015 report, Marketing Health to Women US, also finds that women aged 55
and up are more likely to prioritize anti-aging benefits and treatment of rough skin,
which is consistent with the evolving needs of skin with age. In regards to male
skincare interests, exercising outdoors may help explain the higher priority younger
men place on sun protection. NutriFilter believes that male-oriented body care brands
should go beyond just integrating sunscreen in products, and showcase how the
product compliments that active, outdoor lifestyle men identify with.
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3.3 BUYER BEHAVIOR

Consumers are faced with an overwhelming amount of product and purchasing

decisions when making transactions in the Cosmeceutical Skincare Industry. To simplify
the customers buying process, NutriFilter has identified what it is that motivates buyers
in the targeted market to make transactions.

Key requirements expressed to be essential by consumers in this industry are:

convenience, product experience, and the prioritizing of individual health and physical
appearance.

Regarding convenience, marketing research experts have found that Consumers are
gravitating toward multi-functional products that allow them to get more benefits while
saving them both time and money (Mintel, 2015). NutriFilters perception of this trend
reinforces the pressing need for the introduction of a multi-functional product like the
showerhead. Another emerging trend called New Minimalism confirms the need for a
rewarding product experience rather than the physical product. The NutriFilter shower
experience will provide the consumer with a luxurious way to enhance the health of
their skin. The trend of personal prioritization allows NutriFilter to capitalize on the high
profit margins gained through premium pricing. This value allows consumers to
rationalize spending more money as they continue to see results.

The following statistical data and information is sourced from Mintels Beauty Retailing
report (January 2015) and Mintels Facial Skincare and Anti-Aging report (May 2015)
which illustrate how NutriFilters target customer base typically shops for skincare
products. The report indicates that 29% of consumers purchase items in order to try
something new, and 63% purchased beauty products in the last year to replace
products they use regularly. These percentages indicate that new entrants like
NutriFilter, have the chance to entice key innovators and early adopters to try the
product and gain market share.

Despite the fact that women have stronger purchasing habits when shopping for beauty
related products, men are not too far behind in the consumer buying game. For this
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reason, NutriFilter will also focus their marketing efforts on the male customer segment.
Regardless of gender, both men and women want to look and feel good and will
ultimately do what it takes to attain high quality products regardless of price. Focusing
on the purchasing behavior of women is critical to NutriFilters success. It has been
observed that, starting at a younger age, women are becoming more aware of the daily
abuse and long term damage that the skin is subject to.

Largest Potential Customer Segments

1. Consumers with the highest disposable income

2. Consumers aged 35 and up

3. Women

4. Health conscious individuals

Assuming that these customer segments will be making up a majority of the target
market, NutriFilter anticipates that a large portion of revenue will come from women
aged 35 and up with high disposable income. Below are some of the ways in which the
showerhead will reach its customers:
Type of Method: Supporting statistics:
Channel:
Promotional Newspapers, Health Women 18+ find health-related info:
Channels Magazines, Word-of-Mouth 51% websites
Advertising, Possibly Radio 26% through friends, word of mouth
Advertising (Older) 54% seek a doctor or professional
Distribution Bed, Bath, Beyond, Home 21.4% Mass merchandisers &
Channels Depot, Lowes, Target, supermarkets
Sears, Wal-Mart, Home 16.6% Wholesalers
Goods - Stores targeted 16.0% Department Stores
towards home improvement 14.2% Drug stores

3.4 MARKET SEGMENTATION AND TARGETING

As previously identified, the company will be segmenting the market by age, gender,
and income, specifically targeting females, age 35 and older, with a high level of
disposable income. Specific regions of the United States will be targeted, such as New
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York and Pennsylvania in the Northeast and West Virginia and Maryland in the South.
These specific locations have been found to be highly concentrated with consumers
who have expressed the need to combat common skin imperfections and vitamin
deficiencies. In terms of age, consumers 35 and over are most likely to have the
greatest need for skin revitalization because as people age, the more prone their skin
becomes to issues such as wrinkles, sun damage, dark spots etc. According to New
York City-based board-certified dermatologist, Dr. Debra Jaliman, MD, FAAD, Residents
of every state have their share of positive and negative skin health factors. There are
several factors that can increase the rate at which skin ages, including high levels of
stress, dangerous exposure to pollution and UVA/UBA radiation (PR Newswire, 2015).

3.5 COMPETITION AND COMPETITIVE EDGES

As of 2016, the top five vendors in the larger Global Bath and Shower Products Market
are: Johnson & Johnson, LOreal, P&G, Unilever and Colgate & Palmolive. The two
largest competitors are LOreal SA and The Procter & Gamble Company, which have
market shares of 27.7% and 23.8% respectively. The market leader, LOreal, has
accrued revenues in its cosmeceutical products reaching over $1.6 Billion (USD). Both
LOreal and Proctor & Gamble are mature companies with established channels for the
sale and distribution of their products. In addition, these major companies have also
been growing with the market at a steady rate of approximately 5%. All five of these
competitors have high brand awareness and large market shares in NutriFilters
industry. They have proven themselves as trusted brands over time, and NutriFilter will
strive to do the same. One main focus of the marketing team will be to ensure that
customers are not drawn to potential substitutes due to price, or other pre-existing
organic product options.

The companys competitors have not placed the need for skin care in their shower
products because of the number of alternatives to the NutriFilter showerhead. Once the
product is released onto the market, the management team highly anticipates that like-
products will begin to enter in response. If this becomes the case, NutriFilter is
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confident that the first mover advantage will be valuable enough to keep the product
well-positioned in the market.

With regards to vulnerability, these brands will have to compete with NutriFilters
unique, all natural, easy to use solution to lessen the stress of skin care and the daily
task of showering.

3.6 ESTIMATED MARKET SHARE AND SALES

Based on the assessment of product advantages and the current market, IBISWorld has
estimated that the overall market share for the cosmeceutical skin care industry is
valued at $5.9 billion (USD). Additionally, the top four companies in this industry make
up 72.1%, with the fourth largest owning a 2.7% share. This left over market was
broken down under the assumption that there are many companies in the field holding
a market share below 2%. In the companys first fiscal year the expected market share
to be achieved will be .01% of the $5.9 billion American Cosmeceutical industry. This
would theoretically yield $304,500 in first year revenues, stemming from a successful
sale of 3,480 showerheads and 5,220 cartridges. NutriFilter firmly believes that as
consumers become more aware of the product, tripling growth in the following two
years will be achievable in terms of revenues, generating nearly a 0.031% market share
and $1,323,000 in revenue.

After analyzing these figures, management believes that the companys estimated
market share and sales numbers are correlated with the steady growth of industry,
which is estimated to grow at 6.4% over the next five years. In NutriFilters favor, this
brings forth constant growth for the organization. It is this aspect of the showerheads
strength that differentiates it from all other competitors on the market, and leading
NutriFilter to be optimistic and forecast that the companys steady growth will move it
towards the forefront of captured market share over the next few years.
 P a g e | 18

3.7 ONGOING MARKET EVALUATION

Evaluating NutriFilters ongoing market will range from simple appraisals: on the
targeted market through primary research and data, to customer surveys and
competitor analysis. Advancing communication tactics around both product claims and
ingredient claims in order to better reach consumers is another other ongoing market
opportunity. For example, collecting feedback and information concerning the cartridges
will all be part of a standard assessment and survey conducted regularly to help
generate an idea for ongoing consumer demands.

An essential part of the companys ongoing market evaluation will include staying up to
speed with research on closely related competitors. NutriFilter will understand the
methods they are currently using to obtain larger market shares and remain competitive
with pricing and marketing strategies. Due to the markets short product life cycle, R&D
capital and time investments will be high to keep NutriFilter at the forefront of
consumers mind.
 P a g e | 19

4.0 BUSINESS ECONOMICS

4.1 REVENUE DRIVERS AND PROFIT MARGINS

Using two channels of distributiononline sales and national retailersNutriFilter will

generate revenue from product sales. The first revenue driver will be sales from the
initial showerhead attachment base, retailing at $65 per unit, which is slightly above the
standard industry price of $55 for filtered showerheads. The total cost of production for
every individual showerhead will be $16.05, which is broken into: $10.00 for the plastic
base, $0.05 for the cardboard packaging, and $1.00 for the screw and bolts needed for
assembly and $5.00 for production labor.

NutriFilter will push for strong initial sales of their showerhead, which will result in
stronger sales numbers for their complimentary product: the mineral cartridge.
NutriFilter cartridges will retail at $15.00 for a pack of 10, with the hopes that the
consumer will make 3 purchases a month. The total cost of production for a cartridge
pack will be $6.20, which is broken into an estimated $3.00 for vitamin, minerals, and
supplements, $0.10 for plastic casing, $0.10 for plastic packaging, and $3.00 for
production labor.

The contribution margin for NutriFilters line of products will be $48.95 for the
showerhead priced at $65.00 and $8.80 for the $15.00 cartridge packs for online stores.
NutriFilter anticipates national retailers to require 45% of revenue from sales, which will
diminish retail margins for the showerhead and cartridge packs to be $19.70 and $2.05
respectively. Although the margins are much higher from online sales are much higher,
NutriFilter predicts that the appearance in retail stores will help build customer
awareness and increase overall sales.

It can be assumed that NutriFilters financial performance will remain highly dependent
on these two major revenue drivers. For the first fiscal year online sales of the
NutriFilter showerhead and cartridges will account for 100% of the revenue stream.
Showerhead and cartridge sales from national retailers will not be established until
2018, NutriFilters second fiscal year and will generate approximately. It is estimated
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that initially 29% of the total unit sales will stem from retail stores, with the other 71%
coming from the second year of online sales, but will slowly grow into a 50-50 split. As
a company, NutriFilter foresees showerhead sales to be the initial revenue driver,
however, as time goes on, the demand for new showerheads will slow and demand for
the mineral cartridges will grow. NutriFilter estimates that the mineral cartridges will
make up 60% of the total sales designating the showerhead attachment to make up the
remaining 40% of the total sales in year 1 and 2. In years 3 and 4 the split will grow to
be 25% and 75%, in favor of the showerhead, and it is estimated that by year 5 the
split will be 15% showerhead unit sales, 85% cartridge pack sales. This is a result of
the cartridge packs being a continual purchase.

4.2 FIXED AND VARIABLE COSTS

The majority of NutriFilters fixed costs will be administrative costs. NutriFilter has
allocated $9000 for first year rent expenses, and then $20,000 thereafter. Nutrifilter
anticipates moving to a larger facility within the same region to grow with their
production levels. This is also why NutriFilter adds salary expenses of $90,000 in year
3 and $120,000 in years 4 and 5. NutriFilter also has money allocated towards
professional services, which includes consulting, accounting, and legal fees. NutriFilter
will pay $25,000 annually in product liability insurance and $4,500 in general liability
insurance. Other administrative expenses include website maintenance, depreciation,
payroll tax, and benefits.

4.3 OPERATING LEVERAGE

NutriFilter has a high operating leverage position in its first year of operations as a
result of startup costs such as research and development and marketing. As demand for
sales grows, NutriFilter projects operating leverage to drop from .81 to .36 by the fifth
year of operations. NutriFilter will achieve lower operating leverage in the following
years based on its unit sales assumptions.
 P a g e | 21

4.4 START-UP COSTS

NutriFilter LLC is headquartered Start-Up Costs

in Baltimore, Maryland. Research and Development $70,000
Licensing, filing, and fees will
Business Assets (Office and $43,000
cost $425 to form an LLC.
manufacturing Equipment)
NutriFilter intends to allocate
E-commerce and website $3,000
$70,000 to research and
development
development, $18,000 to office
LLC Filing, Trademark, Other Legal $425
equipment, and $3,000 to e-
Fees
commerce and website
Total Start-Up Costs $116,425
development. Additionally,
NutriFilter will purchase office equipment, totaling $18,000, and manufacturing
equipment totaling $23,000. The board of advisors will each invest $20,000 of their own
capital to support NutriFilter in the first year, amounting to $100,000.

4.5 ECONOMIC MODEL

Within the first six months, NutriFilter will focus their operations on marketing and
product development initiatives. This includes product testing and trials. By July 2017
NutriFilter will launch their showerhead and cartridge packs on the market. Prior to its
launch, NutriFilter will build brand awareness through a marketing campaign and offer
pre-sale purchase options to subsidize the risk of late deliveries and manage accounts
payable to outsourcing.

Moving in year two NutriFilter will seek out vendor relations with national retail stores,
such as Wal-Mart and Bed Bath & Beyond, which the company estimates will take a
45% revenue cut for the NutriFilter products they sell. NutriFilter will see higher returns
on there online sales, so they will market the advantage of purchasing NutriFilter online
versus in retail stores. The key differentiator is that the consumer will have the option
to customize their cartridge packs when making a purchase through the website
whereas cartridge packs purchased in-store will not have this customizable feature.
 P a g e | 22

NutriFilter has budgeted for approximately a 50-50 split in units sold between online
and retailers, slightly favoring online sales. NutriFilter predicts that by combining online
and national retail channels, product sales will break even in the fourth quarter of year
two.

During years three to five, NutriFilter will continue to invest in more efficient supply
chain and inventory management systems, and in time, start to consider the
introduction of new products into the market if financially capable.

4.6 BREAKEVEN ANALYSIS

NutriFilter projects to breakeven at the beginning of the second quarter in year 3. In

order to do so, they will need to sell 13,130 showerheads and 19,696 cartridge packs,
which will amount to $1,148,910 in revenue.

Due to the low variable costs per unit and high contribution margins, reaching this
breakeven point will be easier for NutriFilter unlike other companies in the industry with
high variable costs and low contribution margins.

4.7 PROFIT DURABILITY

NutriFilter has a dependable stream of income as a result of a highly rewarding

customer experience. The product is designed so that consumers will make multiple
purchases and continually add value to the company. High contribution margins from
exporting production labor allowed NutriFilter to see higher profits from units sold.
Despite established companies already dominating the market, NutriFilter has
developed a unique product that delivers value in a way vastly different from its
competitors that sell similar products.
 P a g e | 23

5.0 THE MARKETING PLAN

5.1 OVERALL MARKETING STRATEGY

NutriFilter will communicate with consumers and retailers across a series of different
promotional mediums. The marketing campaign will highlight NutriFilters differentiating
attributes including high product quality and convenience, specialty cartridges, and
outstanding customer service.

The primary research strategy that NutriFilter is using to actively define the market is
through survey analysis. Using an online system called Qualtrics, a survey has been
strategically created, and distributed, through a link across Facebook and LinkedIn
accounts. NutriFilter has obtained a general sense of consumer behavior and
preferences regarding general skincare and vitamin intake. Totaling over 200
responses, the survey conveyed that over 36% of the responding consumers were
women within NutriFilters target market. This large percentage of women also appear
to currently be invested in, or feel the need to be more invested in, health concerns
such as skincare and vitamin balance. In order to connect with this segment of the
market most effectively, NutriFilters marketing strategy will focus on a combination of
personal selling and media advertising tactics. This includes social media, a website,
and popular magazine subscriptions that have the heaviest influence on the targeted
consumers whom fall on the younger end of the age spectrum. NutriFilter has created
Twitter, Facebook, and LinkedIn accounts in order to drive traffic to the website for the
critical success of the first year. The website will be utilized in order to increase brand
awareness, generate consumer interest, and supply additional product information.
NutriFilter has chosen to run its campaign advertisements in four magazines based on
the highest levels of readership according to the targeted consumers. These magazines
include: Mens Health, Self, Parenting, and Womens Health. Being that direct mail has
more of an impact on the older consumers of this market segment, NutriFilter will utilize
this print media tactic to gain brand awareness. NutriFilter will place the product
 P a g e | 24

brochure in health care settings such as; Dermatologists Offices, Pediatricians, Skin
Specialists, Nutritionists, and Nationwide Health and Wellness Centers.

In response to this target market growing at a steady rate in the U.S., over the next
five years, NutriFilter will focus all marketing initiatives domestically. This strategic
decision is supported by an assortment of data from the U.S. Bureau of Labor Statistics
and Economic Analysis indicating a projected steady rise of real disposable income per
capita from now until 2022 at a rate of 1.8 percent annuallydouble the growth rate
seen in the prior decadewhich will ultimately correspond to an increase of real
standards of living (BLS, 2013). From this research NutriFilter is led to believe that this
forecast will have a positive impact on achieving future profitability within the U.S.
consumer market. With that, the company will be able to move internationally
particularly Europewhich according to research, accounts for 48% of the global
market share in the Bath & Shower Products Market (PRNewswire, 2016).

The selling proposition stated in one simple phrase, NutriFiltertransforming your

shower routine into a shower experience, is the idea of a revolutionary product with
the ability to enhance an everyday routine (showering) into something greater and
more valuable.

5.2 PRICING

According to statistics from the global market research provider Mintel, approximately
72% of adults with skin sensitivities are interested in buying skincare products that
have added benefits (eg. skin firming, miniaturization), (Mintel, 2016). This percentage
is promising for a higher priced product like NutriFilter that abides by this claim and
compensates for the added cost. The showerhead will provide the kinds of added
benefits that, in the eyes of a customer, will make something worth its price.

Another key takeaway that NutriFilter can capitalize on, when implementing a pricing
strategy, is to focus on individuals that will be more inclined to invest in preventative
care. These consumers will also be willing to spend significantly more for products with
 P a g e | 25

multifunctional benefits. Per Yahoo! Finance, the average household spent $635 on
personal care products and supplies in 2013 (Rawes, 2014). Presuming that many of
the personal care products found in a household are purchased by adults, NutriFilter
has proposed the following theory: Personal Care spending was considerably high in
2013 and continues to increase into 2016, given that adults will spend any amount
necessary to attain their desired level of health and wellness. Therefore, they are more
likely to splurge on personal care products with desirable benefits, unique ingredients,
or easy-to-use formatsan indicator of increasing sales for the skincare market.

Considering these spending habits when setting a price for NutriFilter, the cost will
remain higher than the industry average when purchasing a specialized showerhead
and all natural cartridges. With an initial pricing strategy to sell NutriFilters showerhead
at $65 per unit and the specialty cartridges at $15 per pack of ten single-use cartridges.
NutriFiltera luxury personal care productis designed using high quality material not
only for increasing durability and shelf life, but for delivering value and trust with every
purchase.

5.3 THE SELLING CYCLE

NutriFilter strongly believes that once a customer has purchased, the NutriFilter
showerhead, the customizable, all-natural cartridges, or a combination of both, the
product will flawlessly become an integral part of their day-to-day life. As customers
start to take control of their health, including the desire to look and feel better about
themselves, they will discover the need for the NutriFilter shower experience.

Brand awareness will be reflected through the companys marketing and advertising
efforts, beginning pre-launch and continued throughout product launch. Initial purchase
will contain both the showerhead and all-natural cartridges. Repeat customers will be
developed through the additional sales of the cartridges leading to a loyal customer
base. To keep customer interest post-launch, the consumer will eventually be able to
select the specific cartridges they desire to go into their personal ten count pack
through the company website.
 P a g e | 26

Customer feedback will be an integral part in gaining insight into the satisfaction level
of the product and cartridge offerings. That is why the company has decided to send
out a post-purchase survey in the hopes of obtaining that vital knowledge.

Ultimately, those first-time customers will succeed into the growing segment of loyal
NutriFilter customers allowing the organization to expand and achieve continued
success.

5.4 SALES TACTICS, ADVERTISING, SALES PROMOTIONS, PUBLICITY

NutriFilter will rely on personal communication with retailers to promote the
showerhead products and cartridges in the targeted stores. This exchange will occur via
phone, or in person, and will become a sales tactic that NutriFilter will utilize to
demonstrate the products unique qualities, and build beneficial relationships. NutriFilter
will be visiting each store, two or three times a year, to offer in-store training
concerning new products and features.

Sales promotions and public relations currently make up the bulk of NutriFilters
promotional efforts. NutriFilter will work with retailers to offer short-term sales
promotions tied to store events, and weekly ads. For example, cross promoting the
NutriFilter offerings in the form of coupons or two-for-one deals, are ways in which
management will help generate increased trial and interest. An additional way to build
interest and increase customer retention will come from the bundling of a variety pack
of cartridges with the initial purchase of a showerhead.

5.5 CUSTOMER SERVICE, WARRANTY/GUARANTEE POLICIES

NutriFilters guarantee policy centers around the belief that purchasing a product, which
the customer will use every day should be of the highest standard. NutriFilter
guarantees its showerhead, and all-natural cartridges, will strive to be of the best
quality in the market, and if it doesnt prove to satisfy the customers needs, NutriFilter
will take responsibility and buy it back.
 P a g e | 27

For the showerhead, warranty-refunds and returns are subject to 90 days after the
initial purchase, new or used, and will only be accepted if all parts and documentation
that were included in the original packaging are returned in the same condition as
received. The cartridges will only be accepted for return if unopened and brought back
prior to their expiration date. Other aspects of the return process that customers should
note is return shipping costs as well as the policy that products will only qualify for
return if purchased directly from NutriFilter.

NutriFilter will refund the full purchase price of the product (excluding shipping and
handling) once the product is received. Orders made through debit or credit cards will
issue refunds back to the respective bank within 10 business days after the returned
product is received. Orders made through NutriFilter on third-party stores and online
marketplaces, such as Amazon, will accept returns. However, returns from third-party
vendors will be sent back directly through the marketplace, and the refund will be
issued to the customer within five business days after the product is received. The last
part of the return process is a survey that will be sent out after the initial purchase, as
well as at the end of the return process to address any follow up needs and appraisals
NutriFilter customers may have regarding their experience.

5.6 DISTRIBUTION

NutriFilter intends to outsource the assembly of the showerhead and cartridge products
to reduce fixed costs and allow for flexibility of capital. This strategic decision eliminates
monthly operating expenses which can prove to be costly. Once NutriFilter showerheads
and cartridges are assembled, first year sales will be shipped directly to customers via a
ground shipping company. When sufficient distribution volume is established with
retailers and wholesalers, distribution will be outsourced to a 3PL. NutriFilter intends to
sell the showerhead at $65 per unit and single-use cartridges in packs of 10 for $15.
Discounts can be used at the retailer and wholesalers discretion. NutriFilter will grant
selling rights to a certain number of companies, such as Wal-Mart and Bed Bath and
Beyond, and anticipates sales through retailers, supermarkets, wholesalers, as well as
 P a g e | 28

online. In recognition that competitors in this industry are distributing products through
these channels, NutriFilter has made the decision to sell across multiple channels to
ensure the outermost target market is reached. From there, NutriFilter will have access
to these channels and, as part of the granted selling rights, can offer discounts to a
channel, or multiple channels, of the companys choosing. These discounts will be
financed by money allocated to NutriFilters marketing budget.
 P a g e | 29

6.0 DESIGN AND DEVELOPMENT

6.1 DEVELOPMENT STATUS AND TASKS

By the end of the sixth month of operations, the NutriFilter showerhead and specialty
cartridge products will be developed. NutriFilter will allocate $70,000 to research and
development of the product, over this sixth month period, focusing on the introduction
of new cartridges and the necessary adjustments to different SKU designs of the
showerhead product.

The operations team plans to partner with Kohler Worldwide for the production of the
showerhead. Management has made this decision based off of their leading bath and
shower innovations and expertise.

NutriFilter values contribution and insight from outside resources ranging from expertise
on product development and design to product testing and feedback from consumers.
Men and women, aged 35 and up are recruited to participate in the development,
design and/or testing of the NutriFilter products to help inform the decision-making
process.

During the product development stage, NutriFilter will recruit a Consumer Participation
Panel to collect distinctive opinions and experiences from potential customers and end-
users on their view of the marketplace. This will subsequently ensure that the market
research NutriFilter has found, accurately reflects consumers' shopping and media
engagement habits.

Over the initial six-month period, the research and development team will be
conducting small batch product testing on willing consumers. During this product
testing phase, participants will be asked to provide feedback on their user experience
and evaluate the products overall performance. This feedback is a foundation for
NutriFilters success to be built upon.
 P a g e | 30

Participation Roles:
Name: Profession/Expertise: Participation Role:

Maria Coconato Product Architect Rendering, schematics of product

Alejandro Guerrero Industrial Designer
Department of clinical
Mia Ruiz-Salvador pharmacology at SUNY
Upstate Medical University
Mr. Boyer Pharmaceuticals
Mr. /Mrs. Frimpong Medical field
Sherry Albert Chemical Engineer
Dean of Engineering at Tufts
Linda Abriola
University
Development of physical product
Primary research and product
feasibility
Cartridge formulas
Health Risks and safety
precautions
Chemical filtration system,
market opinion
Chemical filtration system,
market opinion

6.2 DIFFICULTIES AND RISKS

Manufacture different product

Will the showerhead be
SKUs to be easily accessible by
Physical Risk reachable to every
those with mobility or height
customer?
limitations
Will the showerhead have
Evaluate through product testing
Technical the capability to infuse
and development will and compare
Risk vitamins and nutrients into
similar product designs
the water?
Adjust warranty policies and
Time Risk Will this product expire? conduct primary research to assess
this potential issue
How can NutriFilter ensure
Manufacture a showerhead with a
Performance cartridge contents have
mist setting so that theres more
Risk impactful contact with the
mineral-to-skin contact
skin?
Will the showerhead be Develop different product SKUs
Functional
compatible with all that are compatible with all
Risk
bathrooms? bathroom water pipes
Could negative side effects
Label warnings and continual
Health Risk arise from natural cartridge
testing
mixes?
 P a g e | 31

Considering the potential risks identified above, NutriFilter will continue to adjust the
design and features of the showerhead and cartridges based on market reactions. For
the time being, all of the questions and risks posed above will be resolved and backed
by the design and developmental phase before moving forward with the assembly
stage.

6.3 PRODUCT IMPROVEMENTS AND NEW PRODUCTS

At this point, NutriFilter anticipates an expansion into other markets, such as portable
showerheads, vitamin rich tap water, and other complimentary bath products, such as
high-end cleaners and lotions. Beyond those extended markets, NutriFilter will continue
to reach out to its customers as well as new potential markets to uncover other needs
that have yet to be addressed.

6.4 PROJECTED DEVELOPMENT COSTS

NutriFilter will be developing three to four different showerheads to test for

compatibility and feasibility of the formula blends for the filter system. Relative costs for
the design will be low and expenses will be:

Consultant fees paid to Maria Coconato and Alejandro Guerrero for $250 per
each rendering and product SKU

R&D for showerhead design/cartridge costs: $70,000 for 6 months

6.5 PROPRIETARY ISSUES AND INTELLECTUAL PROPERTY

After conducting research, NutriFilter has found that there are no active patents.
NutriFilter has accounted for professional services and legal fees within their operating
expenses, which can be found on the income statement.
 P a g e | 32

7.0 OPERATIONS PLAN

7.1 OPERATIONS STRATEGY, OPERATING MODEL AND CYCLE

NutriFilter believes that providing the consumers with the ability to customize the
vitamin cartridges to fit personal and health care needs is a key differentiator that will
strongly appeal to the wants and needs of the target market. The operations team will
therefore provide an assortment of first-time user cartridge packs as a bonus feature
for customers to try out in addition to their original order of the single-use specialty
cartridges. There will be lead times associated with sourcing the raw materials for the
cartridges, manufacturing the shower head and cartridges, and then kitting the two
components together as one finished product. Lag time will be present in the time
between the steps of sourcing, manufacturing, consolidation and distribution.

7.2 GEOGRAPHIC LOCATION AND PHYSICAL LOCATION REQUIREMENTS

NutriFilter will be located in the city of Baltimore, Maryland as this area provides a
strategic location from a production and servicing perspective. NutriFilter plans to be on
the East Coast to better service its largest target market population. However, after
taking a strategic standpoint on this important decision, the operations team at
NutriFilter has rationalized that settling in Baltimore would be a more optimal position.
This will allow the utilization of cross country shipping channels to service those
customers located outside of the Northeast.

7.3 FACILITIES, IMPROVEMENTS AND EQUIPMENT REQUIREMENTS

As a company, NutriFilter will be outsourcing the manufacturing of the production of the

showerhead along with the packaging of the specialty cartridges to contract
manufacturers. The showerheads will be outsourced to a manufacturing company called
Kohler Worldwide. NutriFilter has allocated $25,000 for the purchase and development
of specialized manufacturing equipment to aid Kohler in production. This contract
manufacturer has agreed to produce the specialized showerhead at a unit cost of $5.
 P a g e | 33

Outsourcing in the beginning is a tactical move made by the operations team to ensure
that all manufacturing expenses are initially variable costs. This move would allow for
greater flexibility for NutriFilter to be developed into a stable company during its early
stages of growth.

A third-party logistics company, or 3PL, will be handling the consolidation, packing, and
kitting of the showerheads and specialty cartridges. NutriFilter has found that Aphena
Pharma Solutions has the established network and capabilities to source quality raw
materials. This will also streamline the supply chain due to the fact that only Aphena
Pharma Solutions will handle the raw materials. Aphena Pharma Solutions, a
multifaceted company, has agreed to provide these services for NutriFilter. Aphena
Pharma Solutions will also be responsible for the handling of NutriFilters liquid
production fusing the essential vitamins, minerals and supplements into the flexible
single-use packets. The companys 110,000 square foot liquid & topical division
manufacturing facility conveniently has kitting capabilities located in Easton, MD. The
cartridges and showerheads will be consolidated, stored and kitted at a warehouse
facility owned by Belts Logistic Services. Both facilities will be located relatively close to
NutriFilters corporate headquarters in Baltimore, MD assuring excellent customer
service and responsiveness to mitigate risks as they arise. The collaboration of the
operations and financials teams at NutriFilter estimate that this system of supply chain
development will produce a low operating leverage. This will be beneficial in the long
run for mitigating unforeseen forecasting errors or potential dangers that may arise.
 P a g e | 34

7.4 CAPACITY LEVELS AND INVENTORY MANAGEMENT

To better attend to B2B customer sales and B2C online channel sales, NutriFilter has
put forth the need to maintain certain levels of inventory. This decision will allow the
company to regulate and minimize the demand of uncertainty fluctuation when a new
product arrives to the market for the first time. By maintaining a 10% inventory level on
showerheads and a 10% inventory level on the specialty cartridges, NutriFilter will be
prepared to handle production problems, demand fluctuations, and sourcing issues
before they occur.

7.5 LEGAL ISSUES AFFECTING OPERATIONS

Contracts with Aphena Pharma Solutions, Kohler Worldwide, and Belt Logistic Solutions
will be put in place to protect the intellectual property rights of the NutriFilter. These
contracts will recognize costs associated with factors such as capacity and minimum
production that will be determined between NutriFilter and the designated outsourcing
company.
 P a g e | 35

8.0 THE MANAGEMENT TEAM

8.1 ORGANIZATION

Annie, Haley, and Jessie joined together after studying abroad in Florence, Italy during
the spring of 2016. After suffering through the negative impacts that the low water
quality had on their skin, and taking for granted their preferred skin treatments from
home, they naturally came together with two additional members, David and Kwabena,
to establish NutriFilter.

8.2 KEY MANAGEMENT PERSONNEL

David Pepe (CFO): David graduated from the Martin J. Whitman School of Management
with a B.S. degree in Finance. David provides decision support and financial rigor
around business plans, business performance, market expansion, product launches, and
new initiatives. He also oversees business planning, financial reporting, decision
support, while setting and monitoring the short and long term financial goals of the
organization.

Annie Archibald (COO): Annie graduated from the Martin J. Whitman School of
Management with a B.S in Marketing Management and Supply Chain Management.
 P a g e | 36

Annie gained industry expertise and supplier relationship skills through her time with
the Marketing Procurement team at Diageo, where she gained a conceptual
understanding of operations. Being placed within the personal care sector as a
production planning intern, with the organic consumer product company, The Hain
Celestial Group also prepared Annie for her role at NutriFilter. Annie provides the overall
direction for operational management and oversees the strategic planning and decision
making of the operations team. Focused around the activities of outsourcing,
infrastructure, supply and packaging, shipping and production.

Jessie Boyer (CEO): Jessie graduated from the Martin J. Whitman School of
Management with a B.S. degree in Marketing Management and a minor in Psychology.
Jessie is the link between the Board of Advisors and the management team, ensuring
both short-term and long-term goals are being met. Her previous leadership
experiences as a Solution Sales Intern with IBM, and a board member of the Student
Philanthropy Council, has demonstrated Jessies expertise in communication and
customer relationship management. During her time with IBM she uncovered numerous
opportunities for her sales representatives to attain initial meetings with c-suite
executives. These unique experiences, coupled with her drive, high level of
competence, and trustworthiness, Jessie has what it takes to effectively oversee all
company aspects as she continues to passionately lead and transform the NutriFilter
organization.

Haley Albert (CMO): Haley graduated from the Martin J. Whitman School of
Management with a B.S in Marketing Management and Entrepreneurship. Haley has
interned for two companies, QA Consulting and ALS TDI, as a content marketing and
brand promotions intern. Both of these experiences have heightened her knowledge,
experience, and passion for creativity, outreach, strategic thinking and planning, social
media and branding abilities. Haley continues to carry out similar responsibilities for
NutriFilter as she oversees the marketing side of the company ranging from increasing
brand awareness initiatives, managing advertising and promotional activities across
 P a g e | 37

different platforms, supervising market research and analytics, developing digital

marketing content, and brand management.

Kwabena Frimpong (CTO): Kwabena graduated from Syracuse University with a B.S.
degree in Finance and Accounting. In the past Kwabena has served as both an
Accounting & Reporting Consultant and as an Audit Professional. As CTO at NutriFilter,
Kwabena is responsible for supervising the quality of the accounting and financial
reporting. He is in charge of the preparation of financial reports including the balance
sheet and the income statements. As the Chief Technology Officer, Kwabena handles
the responsibility of overseeing the technical aspects of NutriFilter helping management
grow the company using technological resources.

8.3 MANAGEMENT COMPENSATION AND OWNERSHIP

Each member of the management team listed above will earn $35,000 during the first
year of operations. The core values held by the executives of NutriFilter are to support
the productivity and stability of the organization and will come as a priority over self-
compensation. Once NutriFilter starts to grow, and sufficient cash flows are generated,
the management team will be compensated appropriately per company earnings.
Additionally, the executive board will individually invest $20,000 of their personal
savings into the company, and the five members of the team will equally own a
percentage of one-fifth of the companys issued units.

8.4 OTHER CURRENT INVESTORS

At this moment in time, NutriFilter has yet to seek out other investors for the company.
However, the company is anticipating that this will soon change.

8.5 EMPLOYMENT AND OTHER AGREEMENTS, OPTIONS AND BONUS PLANS

NutriFilter anticipates widespread growth into the future, with no plans to exit this
market. Instead, as discussed throughout this plan, the company plans to increase its
 P a g e | 38

presence in the market. As of now, there are no official plans to merge with another
company, or make a public unit offering. In the case that NutriFilter has drastically
overestimated the size of the market, the executives will consider the possibility of an
outright sale or merger as a course of action. In the event that NutriFilters investors
decide to cash in on their stake the founders will purchase their stake in the company.

8.6 BOARD OF ADVISORS

The primary mission of the board is to represent and protect the interests of
NutriFilters unit holders. In so doing, the board has a legal responsibility to oversee the
affairs of the organization and is granted specific rights of authority to partake in
corporate actions issued by the statutes within the state of Maryland. Additionally, the
Board of Advisors will hold responsibility of reviewing, and advising management, on
the NutriFilter operations as well as an obligation to keep them informed when it comes
to assisting management on NutriFilters future development plans.

NutriFilter will be composed of 8 to 10 advisors. It is a requirement to have a balance of

membership between the relevant areas of experience and expertise. The assembly of
the Board of Advisors will include a majority of members who are independent and will
be under the responsibility of the Corporate Responsibility Committee to review and
recommend board changes as appropriate.

The following individuals are board advisors for NutriFilter:

Executive Team - The executive will partake in the board discussions as they
hold they key knowledge on how and what makes NutriFilter a unique shower
experience. Through their expertise they will be able to aid in the achievement of
a sound path for the company.

Larry Albert Larry has over 40 years of career experience in the financial
sector. Larry will provide the company with sound guidance especially in the first
critical five years.

Steve Jenkins As the CEO of NETbuilder, Steve has the skillset it takes to lead a
large company. He will know how to make the hard decisions when they are
 P a g e | 39

required. The executive board will look to Steve as they head into unchartered
waters.

Angel Investor NutriFilters angel investor will hold a spot on the board. The
investor will be able to provide guidance to the founders, and help them
implement sound business strategies.

8.7 OTHER SHAREHOLDERS, RIGHTS AND RESTRICTIONS

The unit holders for NutriFilter and their obligations have all been accounted for above,
and there are currently no others for the time being.

8.8 SUPPORTING PROFESSIONAL ADVISORS AND SERVICES

Advisor: Name: Organization: Expertise: Position Description:

Ensures that NutriFilter

Lawyer;
Daniel Syracuse meets legal obligations as
Legal Professor of
Rice University an LLC and other legal
Business law
matters
Supports the financial
Capital
Larry Financial management matters,
Accounting Management
Albert Advisor including annual accounts,
Partners, LLC
budgeting and reporting
Assists with campaign
Marketing
Tracy Westcott support, social media,
Advertising Communications
Abriola Financial branding strategies and
Manager
marketing efforts
Provides human resource
CEO and
tools, decision making
Steve QA Consulting Business
Consulting strategies, and solution
Jenkins Services Development
input towards company
Director
issues and practices
Oversees financial reports
Banking
Allison and advises financial
Banking TD Bank Customer
Herdrich aspects of development
Service Advisor
plans
 P a g e | 40

9.0 OVERALL SCHEDULE

FISCAL YEAR 1:

January 2017:
Plan/acquire all funds and primary resources necessary for startup and
operations:
Consulting/Advisors/Primary Resources
Maria Coconato (Rendering)
Alejandro Guerrero (Product Design, physical product)
Seek out lawyer
Human Resources (hiring employees)
Each member of the executive board invests $20,000 of their
own capital
Fixed Costs
Executive salary: $35,000
Payroll
Professional Service fees
Office/building expenses R&D
Allocate budget for testing
Design shower head prototypes, cartridge formulas and user process
Reach out to raw material distributors and manufacturers
Raise capital from investors
Purchase raw materials for testing
Manufacture products for testing
Develop a protocol to test prototypes, formulas and processes:
Task 1 - Decide on a budget for testing
Task 2 - Recruit test facilitators and subjects
Task 3 - Define objectives and prepare testing methodology/framework
Task 4 - Conduct testing as scheduled
Task 5 - Evaluate test results of prototype, formula and user process
Task 6 - Refine and conduct multiple rounds of testing as needed
Task 7 - Finalize shower head design, cartridge options and user process
 P a g e | 41

February 2017:

Design NutriFilters website and launch

Initial meetings with potential retailers
Begin development of a marketing campaign to be launched in June

March-April 2017:

Build marketing campaign to create brand/product awareness

Continue to expand promotional and advertising efforts
Continue to make necessary adjustments to the product based off
research
Establish distribution channels with manufacturers

May-June 2017:

Launch online ordering function

Determine production quantity based off of demand
Start building inventory
Movement of finished product to distribution locations

July 2017:

Devise post-launch plan

Paid advertising during week of launch
Launch the first initial product sales
Start generating revenue

August 2017- December 2017:

Post-Launch PlanContinue to monitor, refine and/or execute
the following initiatives:
Marketing/Promotions:
Adjust brand awareness campaign as needed
Expand and monitor social media presence
 P a g e | 42

Offer discounts and rewards

Reprioritize market research pipeline
Expand marketing and advertising support materials
Monitor, prevent, and stay ahead of any potential competition
Continue to assess the health/strength of the market
Continuously track customer milestones

Sales/Customer service:

Monitor NutriFilter across social channels, user groups, publications etc.

Evaluate customer feedback
Secure product reviews and testimonials
Isolate possible causes of dissatisfaction
Adjustment post-sale customer service functions and support
Design retention incentive program
Analyze sales and adjust positioning/pricing strategies as needed

Logistics/Financials:

Monitor product demand

Address high or low inventory needs
Improve efficiency of supply chain
Increase speed/minimize costs of production
Re-evaluate outsourcing channels (suppliers, manufacturers and
distributors)
Refine company long-term expectations/growth objectives accordingly
Assess budget allocated versus budget spent
Tighten budget for next quarter as needed
 P a g e | 43

FISCAL YEAR 2:

Quarter 1, Jan-Mar 2018:

Carry out Post-Launch Plan

Begin distribution in retail stores

Quarter 2, Apr- Jun 2018:

Increase marketing efforts

Assess relationships with retail stores

Quarter 3-4, Jul 2018- Dec 2018:

Establish new relations with larger investors

Breakeven point achieved

FISCAL YEAR 3:

Launch branded event

Product extensions and upgraded features
Achieve positive net income

FISCAL YEAR 4:

$3.5 million in total revenues, end year 4

FISCAL YEAR 5:

$3.5 million in total revenues, end year 4

Customizable cartridge features, end quarter 1
Start expanding into international markets, end quarter 2
$5.5 million in total revenues, end year 5
 P a g e | 44

Fiscal Year 1 will be defined by the product launch of the NutriFilter and the
NutriFilter cartridges in July 2017. Some of the key steps NutriFilter will take to
successfully explode out of the gate in July will be to establish production and
distribution channel, product R&D, raise capital and initiate the marketing
campaign. Post product launch will be followed by an analysis of target market,
customer service and reinvestment revenues back into the company. Fiscal Year 2
will be the year the company will launch into retail stores. Fiscal Year 3 will be the
year the company achieves the breakeven point. Fiscal Year 5 will be a big year for
the company as it will celebrate $5 million in total revenues and the entrance into
international markets. A more detailed step-by-step by for all the anticipatory
decisions made by the company can be found in the Gantt chart.
 P a g e | 45

10.0 CRITICAL RISKS, PROBLEMS AND ASSUMPTIONS

10.1 KEY ASSUMPTIONS
Revenue forecasts (price, volumes, discounts, margins).
That the industry will consistently grow at a constant rate
Development expenses (number of people, key salaries, sub-contracts)
Executive salaries for the first year are $35,000
Average cost of a unit.
NutriFilters price for a showerhead will be $65
NutriFilters cartridges will be sold in packs of 10 for $15
COGS (materials, etc.).
Showerhead will cost $16.05
Cartridge pack will cost $6.20
Capital expenditures (major items)
Rent will be $9,000 for the first year. NutriFilter will then relocate within
the city to a larger headquarters that will cost $20,000 per year.
NutriFilter will raise demand for the product prior to the actual release. It
will then allocate a fixed portion of its budget for marketing.
Building Inventory
Rate of growth in sales
Obtaining a particular site or facility that is key to the business.
Hiring of key staff members with experience in a critical area.
Approval of critical financing.
Overcoming key obstacles in product design.
Fiscal Year 1 will be defined by development and launch of the research &
development
 P a g e | 46

10.2 POTENTIAL RISKS

The management team has identified potential risks in two key areas of the business
model. The first risk being the effectiveness of mineral penetration into the skin and
the second risk being NutriFilters target consumer brand loyalty to existing
competitors.

Risk #1: The first critical risk has to do with a lack of product testing, therefore
NutriFilter will be sure to focus a large proportion of their R&D efforts to this matter.
The technology behind the shower head will be tested and retested utilizing various
cartridge mixes, a diverse geographic sampling of water supply, and the skin types of
multiple test subjects. NutriFilter is confident that the constant evaluation of these test
subjects will bring positive results and help improve our product.

Risk #2: The second risk involves a misunderstanding of the industry and the targeted
consumers. The marketing team has done their due diligence, and have become
experts in the way the potential consumers behave in this industry. NutriFilter has
identified upcoming trends, shopping experience needs, and channel preferences in
order to appeal to the desired consumer and ultimately influence them to choose
NutriFilter.
 P a g e | 47

10.3 ADDRESSING THE RISKS

Type of Risk: Worst-Case Scenario: Company Response:

Brand awareness is very important in

Competitor Risk that consumers stick
the industry and as a new product
Risk with the major players
we do not have this.

Making sure that our product appeals

Technological Minerals potentially do not
to all demographics (Can it be used
Risk effectively permeate the skin
by older generations)

Showerhead is retailed at $65

Potential price-cutting by
Pricing Risk compared to the industry average at
competitors
$55

Industry is growing, but

Industry Risk major players control most of Control prices
the market share

Difficulties or long lead times

Outsourcing manufacturing of our
Production encountered in the
product so we do not estimate that
Risk procurement of parts or raw
there will be any issues
materials.

Higher innovation and $70,000 will be budgeted towards

Budget Risk development costs than R&D which we estimate will cover all
expected necessary expenses
 P a g e | 48

11.0 FINANCIAL PLAN

11.1 HIGHLIGHTS OF THE FINANCIAL STATEMENTS

NutriFilter intends to raise $400k of cash in the first month. The company will secure
these funds by allocating $100k from the boards personal funds and raising the
remaining $300k investment from an angel investor. NutriFilter will allocate these funds
to costs associated with initial research and product development, building inventory
and the launch of a marketing campaign.

To avoid a high interest-paying loan, which is depicted in NutriFilters Statement of

Retained Earnings to fall as low as -$273,450 during the seventh month of operations,
cash requirements will be necessary for NutriFilter in the beginning months. NutriFilter
will also compensate for its payables during this month, and require its receivables
within a 40-day period. NutriFilters ratios appear much more drastic than the ratios of
other companies in the industry. NutriFilter anticipates a quick ratio of 12.54 that grows
to 69.14 the fifth year. NutriFilter is an unlevered firm that does not have debt. This will
be done without the withdrawal of notes payable while still paying off suppliers in a
timely fashion.

NutriFilter will reach its breakeven point in the 38th month of operations. Prior to
reaching breakeven, NutriFilter will diminish expenses by lowering its budget allocated
to marketing and advertising. Going forward, NutriFilter will start to see a slow rate of
sales growth at the beginning of year three and plans to uphold a steady 6% rate of
sales growth past year five.

11.2 COST CONTROLS

The CFO, David Pepe, and the CTO, Kwabena Frimpong will review weekly expense
reports. This team will also have control over the management of funds and
unaccounted budgeted expenses or income. Unaccounted items may include
compensation for business trips, as well as potential rent incomeall of which is subject
 P a g e | 49

to the terms of the office lease signed in year one. Following this first year, relocating
to a larger office space and making company adjustments as needed will keep
NutriFilter at the same pace as the rate in which it is growing.
 P a g e | 50

12.0 PROPOSED COMPANY OFFERING

12.1 DESIRED FINANCING

Based on the insignificantly low cost estimates for NutriFilter, the companys founders
are requesting a small investment of $300,000 to support further research efforts and
resources for company expansion. This financing plan along with the decision to
outsource production will substantially reduce NutriFilters fixed costs, expediting a
positive operating income for NutriFilter by year 2018.
The most suitable source of funding for NutriFilters company structure is equity
funding. The company will refrain from taking out loans therefore the capital they
obtain will be provided by NutriFilters investors. A cash cushion of $100,000 will be set
aside in the event of unexpected expenses or delays in cash receivables from potential
customers.

12.2 OFFERING
NutriFilter is seeking total of $300,000 in equity capital offering a 30% stake in
company units for this offering. The company will issue common units to investors
providing them with fixed dividend but will not include voting rights. The five founders
will each own 14% of the completed offer for a total of 70% ownership of the
company. This yields a 30% hold in the company for NutriFilters angel investor.
NutriFilter has estimated that the rate of return will be approximately 4.66 times
investors initial investment coming out to $1,397,563.

12.3 CAPITALIZATION

Current share of common units outstanding: 100,000 units outstanding

There will be 50,000 units issued to unitholders. The founders will own 10,000
units each for a total of 50,000 units, which will leave 50,000 units outstanding

NutriFilters angel investor will receive 21,429 units in return for their investment.
The company will control the remaining 28,571 treasury units
 P a g e | 51

Post-offering:

o 10,000 units of ownership for each of the five founders totaling to 70%
of the equity

o 21,429 units of ownership for the investor, totaling to 30% of the equity

In terms of NutriFilters common units, 28,571 treasury units will remain unissued and
5,000 of these units will be reserved as unit options for future NutriFilter employees.

12.4 USE OF FUNDS

NutriFilter plans to obtain a $300,000 investment from their investors, putting $125,000
of this capital towards R&D improvement and startup costs while allocating the
remaining $175,000 across building inventory, general capital needs and marketing and
advertising expenses. Customer feedback along with further research will be sourced
for consistent improvements on product performance and future company expansion
endeavors.

12.5 INVESTORS RETURN

By adding the Discounted Value of Free Cash Flow and subtracting it by the companys
Capitalized Costs, NutriFilter is valued at $1,080,116. With a long-term company goal to
expand operations and strive for growth, NutriFilter is expecting a loss in income for its
first year (2017). However, after further research and improvement to the company,
brand and products, NutriFilters founders are projecting a positive cash flow in the
following year (2018). If NutriFilter is unable to meet this sales goal, then executives
will consider the possibility of an outright sale or merger as a course of action. In the
event that NutriFilters investors decide to cash in on their stake, the founders will be
willing to purchase their stake in the company.
 P a g e | 52

13.0 ANNOTATED BIBLIOGRAPHY

"2015 Healthcare Industry Report." Global MNA. Mazzone & Associates, 2015. Web.

"5 Best Vitamins For Beautiful Skin." Prevention. Ed. Prevention. N.p., 11 Dec. 2013.
Web.

"Belts Logistics Services." Belts Logistics Services. N.p., n.d. Web. 04 Dec. 2016.

Bureau, US Census. "American Community Survey (ACS)." US Census Bureau. US

Census Bureau, n.d. Web. 04 Dec. 2016.

"Chapter 2: Work and Retirement." National Institutes of Health. U.S. Department of

Health and Human Services, 22 Jan. 2015. Web. 08 Dec. 2016.

"Contract Pharmaceutical Packaging,Repackaging and Manufacturing Solutions."

Pharmaceutical Packaging, Repackaging & Manufacturing | Aphena Pharma
Solutions. N.p., n.d. Web. 04 Dec. 2016.

"Cosmeceutical Skincare Production in the US." Market Research Reports | Procurement

Research Reports | IBISWorld US. N.p., Oct. 2015. Web. 04 Dec. 2016.

"Dietary Supplements." Dietary Supplements. Federal Drug Administration, n.d. Web.

04 Dec. 2016.

Fox, Martin. Healthy Water for a Longer Life. Amarillo, TX: Dunaway Foundation, 1984.
Print.
 P a g e | 53

"Medicines in Development For Skin Diseases | PhRMA." Phrma. Pharmaceutical

Research and Manufacturers of America, 8 Apr. 2013. Web. 08 Dec. 2016.

"Mintel Beauty Retailing January 2015." Mintel Reports: Consumer Market Analysis |
Mintel.com. N.p., May 2015. Web. 04 Dec. 2016.

"Nutrifilter." Nutrifilter LLC. N.p., n.d. Web. 04 Dec. 2016.

"Nutrifilter Market Research Survey." Qualtrics. N.p., n.d. Web. 04 Dec. 2016.

Publications, Harvard Health. "Listing of Vitamins - Harvard Health." Harvard Health.

N.p., n.d. Web. 04 Dec. 2016.

Skelly, Michelle. "Purchasing Skin Care Online from Amazon, EBay, and Craigslist."
LaurieLombardicom. N.p., 8 May 2016. Web. 08 Dec. 2016.

Smith, Gavin. "Cosmeceutical Skincare Production in the US Industry Market Research

R." PRWeb. IBISWorld, 2014. Web. 08 Dec. 2016.

U.S. Census Bureau - Population Division. "Population Estimates." US Census Bureau,

Data Integration Division.

US Census Bureau, n.d. Web. 04 Dec. 2016.

 P a g e | 54

14.0 APPENDIX
APPENDIX A: GENERAL ASSUMPTIONS

Sales revenue is split between the NutriFilter Showerhead and the NutriFilter
Cartridge Packs. In years 1 and 2 NutriFilter assumes a 40:60 split between
showerhead and cartridge pack sales. During years 3 and 4 the split will be
projected 30:70 and in year 5 15:85. This is the result of accumulating
customers who will make continual purchases of our cartridge pack.

NutriFilter believes that sales of the showerhead will increase every year up until
year 5, where the company sees a decrease in the number of showerheads sold,
but a large increase in the number of cartridge sales. NutriFilter anticipates
modifying its marketing efforts to sell cartridge packs to existing customers than
expanding its showerhead customer base.

Sales figures were calculated through an estimated marketshare of .01%

revenues in a $5.9 billion industry.

o Marketshare by units was estimated from a 2010 census of target

consumers over the age of 35 with higher than average disposable
income.

NutriFilter will pay exectuve salaries the first year and hire employees their third
year.

o NutriFilter will pay executive salaries the first year, totalling $175,000, or
$35,000 per executive salary. NutriFilter will raise executive salaries to
$40,000 per executive starting year 4, totalling $200,000. This marks a
raise of 14%.

o NutriFilter intends to hire additional workers in its 3rd year of operations,

and will pay them annual salaries of $30,000. These workers will be used
as customer and supplier relations. NutrFilter budgets to hire an
additional worker its 4th and 5th year respectively to keep up with demand.
 P a g e | 55

o NutriFilter accounts for a payroll tax of 25%

Rent expenses will increase in the second year as NutriFilter will seek out a
larger office space to expand as the companys revenue grows.

NutriFilter is an LLC, which means the company does not have to pay income tax
directly on its income. Therein, NutriFilter will begin to pay taxes in its 3rd year,
after the company breaks even.

Company investment includes an investment of $100,000 from the companys

founders, as well as an additional $300,000 from an outside investor. This
investment will allow NuriFilter to have a cash cushion of approximately
$100,000.

NutriFilter will have two items that will include a depreciation expense.

o NutriFilter will purchase office equipment for $18,000

o NutriFilter wil purchase manufactring equipment for $25,000

This is specialized equipment for plastic molding that will be used

by our manufacturers to create the showerhead and cartridge
packing.

o The useful life for both items is 6 years, which will equal a write off of
$7167 annually in depreciation.

INCOME STATEMENT ASSUMPTIONS

YEAR 1 ASSUMPTIONS

Selling Expenses

o First year sales will primarily be from online sales. The marketting team
will work on promoting the website in order to generate traffic and
increase revenue.

o NutriFilter has alloacted $70,000 towards its marketting and advertising

expenses. The majority will go into online advertisemnets and promotional
 P a g e | 56

deals, but the marketting team also will utilize magazine and direct mail.
NutrFilter will not begin its campaigns until the its 5th months to generate
demand before the product launch.

o Website development costs are estimated at $3000. Maintenance fees will

accrue to $100 a month to ensure feasibility of use and optimal server
connection.

o The showerhead will retail at $65. The contribution margin will equate to
$48.

Plastic molding will be $10 per unit

Cardboard packaging will be $0.05 per unit

Screws and assmbly will be $1.00 per unit

Production Labor will be $5.00 per unit

Total COGS will be $16.05

o The cartridge packs will be sold in packs of 10 for $15. The contribution
margin will equate to $8.80

Minerals will cost $3.00

Plastic will cost $0.10

Packagin will cost $0.10

Production Labor will cost $3.00

Total COGS will be 6.20 per unit.

Administrative Expenses

o Executive salaries are $30,000 annually.

o NutriFilter plans to allocate $4,500 for general liability insurance and

$2,083 for product liability insurance monthly.
 P a g e | 57

o Rent is based on assumptions calculated by regional estimates of

expenses.

o Filing fees in Baltimore

$100 basic filing fee

$25 for application

$300 for annual reports

Total: $425

o NutriFilter will higher a seasonal accountant to file reports at the end of

each fiscal year. The service estimates are $1000, which will be paid
January and December in the first year. Addictional consulting fees
include:

Legal counciling

Product rendering and development paid to Maria Coconato and

Alejandro Guerrero.

Professional services estimate for year 1: $4000

Office supplies is estimated $75 a month

YEAR 2 ASSUMPTIONS

Selling Expense

o NutriFilter will expand into retail stores pending an agreement with a

national chain. NutriFilter estimates a 45% retail fee that will drop
contribution margins on retail sold products to $19.70 and $2.05.
Revenue from sales will nearly triple in NutrFilters second year as a
result of retail stores nearly doubling showerhead sales.

o Cost of Goods Sold will total $213,780. NutriFilter will drop its
advertising to $8000 in the second year of operations and focus on
building its brand in retail stores.
 P a g e | 58

Administrative Expenses

o NutriFilter will be moving to a larger location its second year. Annual

rent will jump from $9,000 to $20,000 annually.

o Office Supplies will raise to $1200 from $900 the previous year.

o NutriFilter raises its website maintenance budget to $1,500 annually as

the websites popularity grows.

YEAR 3 ASSUMPTIONS

Selling Expenses

o Cost of Goods Sold will raise from $216,282 to $382,369. This is the
result of retail sales having a lower contribution margin than online
sales.

o NutriFilter will drop its Marketing and advertising budget to $6,000 as

its social media presence and online sales develop even further.

o NutriFilter will accrue more cartridge sales in proportion to its

showerhead sales.

Administrative Expenses

o NutriFilter will break even in their 2nd quarter.

o NutriFilter will hire three employees to manage customer and supplier

relations. They will be paid $30,000 annually plus benefits.

YEAR 4 ASSUMPTIONS

Selling Expenses

o NutriFilter projects a slow in growth of sales of showerheads. Down to

6.25% from 98% the previous year.

o NutriFilter will hire an additional worker to manage social media and

team with marketing.
 P a g e | 59

o Nutrifilter will lower its marketing budget to $5,000.

Administrative Expenses

o NutriFilter rasies executive salaries from $35,000 to $40,000 per year

per person. This adds $25,000 in additional executive expenses.

o NutriFilter will hire an additional worker to manage social media and

team with marketing.

YEAR 5 ASSUMPTIONS

Selling Expenses

o NutriFilters Cost of Goods Sold will rise to $719,940.

o NutriFilter begins selling more showerheads in proportion to cartridges.

Administrative Expenses

o NutriFilter will hire additional workers to manage logistics and

inventory for $30,000.

o Payroll Tax and Benefits Expense increase by $7,500 due to the

addition of more workers.

BALANCE SHEET ASSUMPTIONS

BALANCE SHEET YEAR 1

In January, NutriFilter will begin to build credit to the amount of $41,104 to

account for operating expenses.

NutriFilter buys office equipment and manufacturing equipment for a total of

$43,000

In July, NutriFilter starts building product inventory to begin sales for $1,147.

By year-end, NutriFilter has accumulated $2,117 of inventory.

 P a g e | 60

NutriFilters receivables reach $3,654.

BALANCE SHEET YEAR 2

NutriFilter continues to build product inventory for $2,138.

By year end, NutriFilter cash balance reaches $227,039.

BALANCE SHEET YEAR 3

NutriFilter continues to build product inventory for $3,131.

NutriFilter starts to accumulate more accounts payable as the demand for

product increases.

NutriFilters payables reach $13,804.

NutriFilters receivables reach $10,893.

BALANCE SHEET YEAR 4

NutriFilters current assets reaches $775,000 with a cash balance of

$754,479.

NutriFilter continues to build product inventory for $4,883.

NutriFilters receivables reach $16,413.

BALANCE SHEET YEAR 5

Cash balance reaches $1.1 million.

NutriFilter continues to build product inventory for $6,782

NutriFilter will account for this added cost by increasing Accounts Payable by
$1,250.

NutriFilters receivables reach $20,573.

 P a g e | 61

APPENDIX B: PRODUCT RENDERING 1

APPENDIX C: PRODUCT RENDERING 2

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APPENDIX D: VITAMIN CARTRIDGES RENDERING

APPENDIX E: NUTRIFILTER WEBSITE STORE

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APPENDIX F: NUTRIFILTER WEBSITE HOMEPAGE

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APPENDIX G: QUALTRICS PRIMARY RESEARCH SURVEY

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APPENDIX H: QUALTRICS ONLINE SURVEY FORMAT

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APPENDIX I: QUALTRICS SURVEY RESULTS AND GRAPHS

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APPENDIX J: IBISWORLD MARKET RESEARCH

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APPENDIX K: NUTRIFILTER PROMOTIONAL BROCHURE

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APPENDIX L: YEAR 1 INCOME STATEMENT

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APPENDIX M: YEAR 1 BALANCE SHEET

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APPENDIX N: YEAR 1 CASH FLOW

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APPENDIX O: YEAR 2 -5 INCOME STATEMENT

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APPENDIX P: YEAR 2 -5 BALANCE SHEET

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APPENDIX Q: YEAR 2 -5 CASH FLOW

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APPENDIX R: NUTRIFILTER SALES ASSUMPTIONS

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APPENDIX S: NUTRIFILTER BREAKEVEN ANALYSIS

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APPENDIX T: NUTRIFILTER DCF VALUATION

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APPENDIX U: NUTRIFILTER GANTT CHART

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APPENDIX V: PRODUCT RENDERING (BY: MARIA COCONATO)