propulse business prospectus

ProPulse Business Prospectus

Prepared by: Gina Eom 21502455

Ash Khan

27th May 2013


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Confidentiality Agreement

The undersigned reader acknowledges that the information provided in this business

prospectus is confidential; therefore, the reader agrees not to disclose it without the

express written permission of Gina Eom.

It is acknowledged by the reader that information to be furnished in this business plan

is in all respects confidential in nature, other than information that is in the public

domain through other means, and that any disclosure or use of this confidential

information by the reader may cause serious harm or damage to ProPulse Ltd.

Upon request, this document is to be immediately returned to Gina Eom.

___________________

Signature

___________________

Name (printed)

________________

Date


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Table of Contents

Confidentiality Agreement ....................................................................................... 2

EXECUTIVE SUMMARY .............................................................................................. 4 The Business ............................................................................................................................................................... 4 The Market ................................................................................................................................................................... 4 The Future ..................................................................................................Error! Bookmark not defined.

PROPOSED COMPANY OFFERING ............................................................................. 5

THE MANAGEMENT TEAM ........................................................................................ 5

THE COMPANY AND THE CONCEPT ........................................................................... 7 OUR MISSION .............................................................................................................................................................. 7 THE HEALTH AND FITNESS INDUSTRY .................................................................................................... 12 THE TECHNOLOGY ............................................................................................................................................... 13 EXTERNAL ENVIRONMENTAL ANALYSIS ................................................................................................ 15

ECONOMICS OF THE BUSINESS ............................................................................... 16 GROSS AND OPERATING MARGINS ..............................................Error! Bookmark not defined. PROFIT POTENTIAL AND DURABILITY .....................................Error! Bookmark not defined. FIXED AND VARIABLE COSTS ..........................................................Error! Bookmark not defined. BREAK EVEN ANALYSIS......................................................................Error! Bookmark not defined.

THE MARKET ................................................................. Error! Bookmark not defined. S.W.O.T. ANALYSIS ................................................................................................................................................ 19 OUR PRODUCT POSITIONING ......................................................................................................................... 20 MARKET SEGMENTATION ............................................................................................................................... 21 OBJECTIVES:............................................................................................................................................................. 21

PRICING STRATEGY………………………………………………………………………………………19

PROPRIETORY ISSUES ............................................................................................. 25

REGULATORY AND LEGAL ISSUES ........................................................................... 25

OPERATIONS PLAN ................................................................................................. 27

CRITICAL RISKS & ASSUMPTIONS............................................................................ 29 RISKS ............................................................................................................................................................................ 29 Assumptions............................................................................................................................................................. 30

THE FINANCES ............................................................... Error! Bookmark not defined. KEY OBJECTIVES AND FINANCIAL REVIEW ............................Error! Bookmark not defined. BALANCE SHEET FORECAST............................................................Error! Bookmark not defined. PROFIT AND LOSS FORECAST .........................................................Error! Bookmark not defined.

EXIT STRATEGY ............................................................. Error! Bookmark not defined.


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EXECUTIVE SUMMARY

The Business

ProPulse is a privately owned company in Melbourne, Australia. Gina Eom and Ash

Khan are the founders of ProPulse are the majority owners. John Poulakakis, Olga

Chotiy are on the advisory board. Hatan Al-Shahry and Melissa Bridges are amongst

the Board of Directors and hold minority stock positions.

ProPulse produces – in the form of a long sleeve shirt, a comfortable alternative to the

various heart rate monitors and fitness trackers that currently exist. We offer highly

innovative and technology driven products that help individuals accomplish their

physical and mental health goals. No other company has produced an integrated and

new product like this, thus giving us a competitive advantage in the current market.

The Market

ProPulse intends to cater to sport, exercise and health enthusiasts of varying levels of

ability and interest ranging from novice to professional athlete. Consumers of fitness

services and products are aware that understand the positive benefits of exercise in

combination with such devices. From gen y to baby boomers ProPulse’s aim is to

provide the consumers with a tool to optimize one’s health, further their capabilities,

and improve quality of life.

The Future

ProPulse plans to grow in the industry though market development – from selling

locally to expanding into the global market and Market and cultivate ProPulse's brand

and image as the premier long-term health and fitness products provider. Product

development and product variation will be possible through continuous research and

development providing consumers with newer technologies that ………


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PROPOSED COMPANY OFFERING We have estimated total start-up costs of $500,000. The numbers in the start-up and the start-up funding tables are meant to reflect these estimates. The company capital

will be $300,000. Ash Khan and Gina Eom, as co-founders, will provide the bulk of start-up financing in the

amount of $50,000 ($25,000 and 25% ownership each). Also, $50,000 of Veski innovation fellowships would be obtained in government grants. An additional $100,000 additional funding would be needed. Therefore ProPulse offers a prospective investor a chance to become a co-owner and participate in the company’s capital for the amount of $100,000, and could be offered a 20% ownership stake in it. The funds provided by the investor will contribute towards covering part of the start-up expenses. For the remaining additional $200,000 financing need to cover the start-up costs, we plan to receive a five year commercial loan at 12 % interest per annum from the Commonwealth Bank which will meet the cash flow requirements. The borrowed funds would be used to cover part of ProPulse’s start-up expenses. The loan will be repaid in equal monthly installments over the five year period.

THE MANAGEMENT TEAM

Gina Eom

Gina Eom is the co-founder and CEO of ProPulse. Gina thought of the idea in 2011 as

a regular user of heart rate monitors and various fitness trackers. After spending years

of discomfort with heart rate monitor chest straps and the annoyance of various

gadgets and devices she became frustrated that there was not one product that

provided all of these tools in a simple and easy way. Thus ProPulse was born.

Gina has a Bachelors degree in Behavioural Studies and a Masters degree in

Marketing from Monash University thus can utilise these skills in the creation and

execution of the ProPulse brand. Through Gina’s outstanding networking skills

ProPulse has access to a wide range of professionals. This list includes Accountants,

Lawyers, Sports Advertisers & Marketing Directors and those working in the various

fitness industries.


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Ash Khan

Ash Khan is the co-founder and CFO of ProPulse. He has a Bachelors of Commerce

(Finance) degree from the University of Wollongong and a Double Masters degree

(Masters of Business (Marketing) and a Masters of Professional Accounting) degree

from Monash University make him the ideal candidate for handling the main financial

activities of the company. With considerable experience working for a B2B platform

for Dubai World and as a marketing assistant at Microsoft, he brings a solid

knowledge of the business environment into the company. Having also worked at

TNT Express in the past, he will be able to use his personal contacts as an advantage

when negotiating freight contracts

Hatan Al-Shahry

Hatan is the Head of Product Development at ProPulse. He possesses a Bachelors

degree in Biomedical Science from Swinburne University and is considered

somewhat of a prodigy having graduated top of his class. He is the brains behind

bringing the ProPulse concept into fruition and has a proven track record for

developing highly innovative products.

Michelle Bridges

Michelle is a prominent and successful personal trainer, author and TV personality.

Famously known as being the personal trainer on the Australian version of The

Biggest Loser, she will serve as both the Director of Marketing and act as a Brand

Ambassador of ProPulse. Her extensive knowledge of the fitness industry alongwith

her popular image and famed reputation will be a massive asset to the ProPulse team

in its attempts to reach its marketing objectives and increase brand awareness

John Poulakakis

John Poulakakis is the Chief Commercial Officer of the Melbourne Demons Football

club. Previously he has been the managing director of the Campaign palace - a highly

renowned and awarded agency and also has started his own marketing consultancy.

With John’s years of expertise in Advertising and Marketing, and his current position

within the sports and fitness industry, ProPulse will have access to a range of


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information and connections and his knowledge will be invaluable to the company’s

success.

Olga Chotiy

Olga Chotiy is a manager and accountant on the advisory board of Pro Pulse. She will

guide the company with regards to finances, budgeting, the prospective outlook and

manage the financial health of ProPulse in the most critical years. In order to aid the

full success of the brand, Olga will offer her business expertise and contacts within

the industry

THE COMPANY AND THE CONCEPT

ProPulse is a company situated in Melbourne Australia. Gina Eom and Ash Khan

formed it in January 2012. ProPulse aims to provide health and fitness products and

services that are innovative and high in quality. It will join health and fitness

industries aiming at (1) disease prevention, (2) optimized health, and (3) improving

overall quality of life, thus relevant to the majority of individuals all over the world

today.

OUR VISION To create awareness about a healthy and active lifestyle and its benefits it brings,

especially in today’s society where the obesity epidemic is growing and concern for

health is rising.

OUR MISSION Our business model is clear. Our value proposition is to provide customers with high

quality products that are easy to use to aid their athletic and everyday performance

and accomplish their physical and mental goals.

We are developing revolutionary products that transform the way we think about


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electronics and their interaction with the human body. Listening to your body is one

thing, understanding what it is telling you is an altogether different story.

PRODUCT CONCEPT

ProPulse produces a comfortable alternative to the current heart rate monitor and

fitness trackers that exist. The idea is to offer an inbuilt heart rate monitor in the form

of a long sleeve shirt, instead of chest strap that tend to slip, loosen and chafe during

exercise and various other tools that need to be clipped on, or held by the individual.

Designed for comfort and extended wear, the ProPulse Shirt is constructed of an

advanced wicking fabric with special sensory fibers integrated directly into the

garment. Smart clothing technology allows for the combination of machine and

garment. Skin contact with embedded sensors, allow vital signs of the human body to

be captured (Kang, 2006). The textile electrodes are knitted into and the fabric acts

as a second skin that moves and stretches with the body.

Along with the basic functionality of many other heart rate monitors and fitness

trackers, the sensors detects hydration levels of the body and also measure calories

burned during a workout and can adjusts daily caloric intake to each according to

each individuals body, providing figured for future caloric expenditure allowing

individuals to plan ahead. This gives Propulse a unique advantage over other

companies in that we can take estimation component out of our product as it is

tailored to each individual and their body.


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ProPulse shirts have an inbuilt ‘rollable display’ around the wrist area in place of a

watch. A flexible organic light emitting diode (FOLED) is incorporated with a

flexible thin film allowing it to be bent or rolled while operating (MacDonald, 2003)

This forfeits the need to wear a chunky watch, arm band or carry around a tracking

tool as one exercises or goes about their day.

The ProPulse garment is also integrated with smartphone/android application and a

program to sync with one’s computer allowing individuals to track their information

and optimize their day.

ProPulse will cater to many groups of individuals. For athletes ProPulse’s product

may mean a deeper understanding of their performance and thus of their sport,

allowing users to find and repeat their peak performances and to raise their ability to

new levels. And for everyday individuals the ProPulse offers an investment in our

product and a fitness solution to improve well-being.

We anticipate that our product alone will be profitable, however, we also perceive

substantial opportunities in expansion of our products in the future.

ENTRY GROWTH AND STRATEGY

ProPulse is in the entry stage currently and numbers are expected to grow an average

of 7.0% in the first year and with a significant increase in the year after. There is an

immediate need for technologies that enhance the exercise experience, as well as for a

leader that will educate and guide the market in a new and innovative way. ProPulse

aims to integrate technologies and functions like no other company has done.


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The fitness market is constantly growing and evolving. It represents a huge untapped

customer base and with strong current economy and with the rise of obesity and

concern for health, there is room for ProPulse within Australia and in the rest of the

world.

Growth in revenue has been driven by the mainstreaming of fitness services as health

awareness increases (IBISWorld Industry Report, 2012). ProPulse first aims to

develop a solid domestic sales base in order to provide us with the cash flow and

working capital needed to form and develop good export markets. ProPulse will use

sporting, fitness and other relevant retailers (i.e Harvery Norman, Sportsmart) as

streams to market our product to the consumers. ProPulse will also show in various

fitness expo’s and conventions and put a website in place in order to distribute the

product locally and overseas.

Various factors set ProPulse apart as a company optimally positioned to experience

significant growth in the near future. It premiered as an innovative company to bring

to market a unique blend of fitness, health, medicine and technology in its product.

The increase in obesity and a rise in number of interest in fitness and health especially

in the western world allows for market potential and growth in this sector.

Expansion of the ProPulse success is planned in various ways:

→Product Development:

Short term

As a variation of the core product, broaden the current range into singlets and

t-shirts with the rollable display placed elsewhere on the product


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Long Term

R&D- By using different sensing materials, various concentrations of

substances such as potassium, magnesium etc in the sweat can be detected,

broadening our products usefulness further in the medical and health industry

Incorporation of an inbuilt blood pressure monitoring technology

→ Market Development:

Short Term

From selling within Victoria, ProPulse product will be distributed around to

retailers around Australia

ProPulse will also look to sell to health and fitness clubs as well as sporting

clubs, along with our retailers

Long Term

Although selling online, once business processes are set in place ProPulse

will expand to the US, UK and China etc, for increase in market potential.

Local offices will be set up in various geographical markets with the intention

of having greater control over marketing and distribution with customers in

various countries

Relationships and networks are to be made with the overseas market in order

to increase brand awareness, base and presence of our brand and product

ProPulse would also aim to partner up with major fashion labels in the near

future in order to incorporate our technology into mainstream fashion and

promote the product concept of Healthy Fashion

It would also lobby major sports governing bodies and promote to them the

usefulness of our product in helping prevent adverse heart related deaths on

the pitch (which is currently a growing concern)


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MARKET RESEARCH AND ANALYSIS

THE HEALTH AND FITNESS INDUSTRY Facts:

The prevalence of overweight and obesity in Australia has been steadily

increasing over the last 30 years (ABS, 2012).

Australia is one of the most overweight developed nations, with overweight

and obesity now affecting over 60% of Australian adults and one in four

children (Stassi, 2009).

While the current status of Australians' overall health and fitness may not be great,

Australia's health, fitness and weight-loss industries booming. More Australians are

seeking the assistance of professionals and products, spending to get their health and

weight under control.

In 2011 Australia’s fitness sector earned revenue of $1.77 billion, representing

growth of 3% per annum over the past five years, which was pretty solid

considering the economic downturn that occurred during the same period

(IBIS world report, 2012).

Australians are increasingly viewing fitness spending as a necessary expense.


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It is expected that demand for health and weight-management services will

continue to rise - to reach $3.0 billion by 2017-18 (IBIS world report, 2012)

Not only within Australia but also in much of the developed world, the fitness/health

industry continues to benefit from growing awareness of health issues and the

importance of exercise in maintaining good health.

The US fitness sector continues to record yearly growth of 1% and is worth

$25 billion.

China’s fitness industry is set to witness significant growth over the coming

years. Though at present only 10% of Chinese people’s income goes to health,

it is predicted that this will jump to 30% over the next five years (Guangzhou

International Fitness Fair (2012)).

THE TECHNOLOGY

Over the past decade, Australia’s health and medical industry has grown dramatically

in size and reputation for its world leading technology, innovation, high professional

skills, advanced research, development and robust health system.

Consumers of fitness services and products are aware that fitness can provide the

necessary tools to optimize one’s health, improve quality of life and extend life span.

The fitness and health industry have been evolving, with fitness tracking tools

becoming of majour importance to allow them to keep a close record of their progress

and fitness goals. Demand for real-time data, including personal health information, is

driving the market for wearable, wireless devices that will grow from 14 million items

in 2012 to as many as 171 million in 2016 (IMS Research, 2012). In four years, the

market for wearable wireless devices is expected to achieve minimum revenues of $6

billion (IMS Research, 2012).

Furthermore, the sports and health mobile application market will grow to over $400

million in 2016 - up from just $120 million in 2010. Much of that growth will be


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spurred by the ability of mobile handsets to easily connect to wearable devices that in

turn can deliver new functionality, accuracy, and appeal to sports and fitness

application. The integration of a tracker, mobile application and the innovative

garment gives ProPulse competitive edge on a global scale within this industry.

COMPETITORS AND EXISTING MARKETS

There is a greater use-case for wearable technology in order to transmit data such as

vital signs, and track user performance. Dominant wearable products in activity

monitors exist within various categories:

Fitness : Fitbit, Adidas miCoach and Nike Fuelband

Functions: tracking daily steps and general activity, estimating caloric output.

Heart Rate: Garmin, Polar and Suunto

Functions: Heart rate monitoring, estimation of caloric output, stopwatch/timer

Medical: Abbott and Medtronic

Functions: Glucose monitor

(The medical market is an area in which ProPulse hopes to expand in the near future)

For the time being we find the threat of competitors is moderate. Although here are

main firms mentioned above that provide heart rate/fitness monitors globally this

industry is a constantly evolving and new products and services are being formed. We

are the first company to integrate and evolve this technology in the form of a single


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garment discarding much of the guesswork that other brands use and believe our

unique proposition is what truly sets us apart.

Competition among such brands to gain market share exists in the areas of new

technologies, product performance, price and service, design and strategic alliances

etc however there are untapped areas within the market making it worthwhile for

current and new innovative companies such as ProPulse to enter.

A barrier to entry in the fitness and health industry - namely regarding products if a

company wants longevity may be the capital investment required, especially as an

adequate amount of ongoing R&D is involved with product development.

The system and technology like ours does not exist yet in other brands

EXTERNAL ENVIRONMENTAL ANALYSIS

This section contains an environmental analysis. Although we recognise six

influences in the environmental factors, they are all linked to each other, so if there

are dramatic changes in government policies we would often also see changes in

social and economical factors. Recognising these trends and changes can help

ProPulse identify viable strategies that will influence performance within the

business.

Political Economic

Government policy has potential to influence the market, specific initiatives could benefit the industry but there’s also a broader push on the part of the government to try and promote healthy eating and exercise, possibly resulting in more people seeking

lack of funding, grants and initiatives may pose a problem for ProPulse

international legislation, government policies, trading policies regarding China exporting/manufacturing processes may change

Factors such as utilities prices, wage rates and R&D will affect numerous aspects of the company

Economic trends may change and Individuals may need to prioritise their spending and cuts are made on their disposable income.

Seasonality issues - people tend to be focused on health and exercise coming into warmer months

labour costs changes in China – cost of production may increase

Social Technological


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Lifestyle factors such as growth in convenience foods and home entertainment have resulted in more sedimentary lifestyles, consumption levels of alcohol are rising which will effect active participation and exercise. In today’s culture there is lots of pressure to look better and have better bodies; this has influenced the levels of people who want to improve themselves

how the public view the brand and its image can shape how successful we are

‘weight loss’ products and its buying trends can be very fad based

There is always new technological advances being discovered thus it is vital that ProPulse continue their research and development in order to stay ontop and continue offering consumers the most innovative and latest findings

Staff need to be qualified and suitably trained to use the equipment/technological tools

Environmental Legal

ProPulses environmental impact that raw materials regarding the product may be costing

adverse weather impacting shipping and transport of the product and its parts

Changes in legalities and regulations especially when dealing with overseas i.e. China

health and fitness sector specific regulatory compliance

ECONOMICS OF THE BUSINESS

Break Even Analysis

We estimate our monthly fixed costs to be $33,511. Our monthly break-even analysis reveals that we require revenue of $57,450 a month to cover our costs, parting with neither profit nor loss. With our products priced at $120 per unit, this equates to a minimum sale of 479 units a month. Following are the calculations that we conducted to arrive at this estimate and the accompanying break even analysis chart:

Contribution Margin Ratio: ($120 - $50)/ $120 = 0.58

Monthly Breakeven Sales Volume: ($33,511)/0.58 = $57,450


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Break-even at $57,450 a month equates to $689,400 a year. This implies that, in order to break even in year 1, ProPulse would need to achieve at least 81% of its projected sales revenue ($854,576). At 79% of our sales forecast, we are confident that this is very much achievable. Furthermore, 25% of our fixed costs are discretionary, and are attributed to marketing and promotions. What this means is that we will have the option to decrease our fixed costs by 26% each month (on average) at our discretion. As fixed costs are the main ingredient of the break even analysis, this gives us the ability to reduce our break-even figure by up to 25% or $171,480. This would bring our break-even estimate to $43,160 which corresponds to the minimum sale of 360 ProPulse units.

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0 1000 2000 3000 4000 5000 6000 7000 8000 9000

Units

Break Even Analysis

Sales Fixed Costs Total Costs BEU approx. = 5745


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$0

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2014 2015

Net Profit: Yearly

Net Profit: Yearly

$460,000

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$510,000

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$530,000

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$570,000

2014 2015

Gross Margin: Yearly

Gross Margin: Yearly


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THE MARKET

S.W.O.T. ANALYSIS

Strengths Weaknesses

- Owners commitment and dedication towards health care and fitness -Pro Pulses attention to marketing - High quality garments - technologically advanced product - excellent innovation - Advisory Board consisting of strong network contacts - integration of various trackers that does not exist yet

- Low customer awareness - High start up costs particularly due to the high technological demands - customers with brand loyalty to other existing brands

Opportunities Threats

-continuing globalisation - start up company, no image/brand yet. (is this a weakness?) Thus can create… -expanding/evolving market and expansion abroad - product and services expansion - further improvement in product innovations -acquisitions and licensing programs (expanding/venture into new areas = larger audience = larger profit generation)

-competition: will face a challenging situation in creating its brand image and attracting customers towards their services due to presence of already established players in the local market -product substitution - external changes -possible economic slowdown

In order to overcome any weaknesses, the heavy base of marketing knowledge and

experience in the industry from board advisors will help so that ProPulse campaigns

are a success and the consumers quickly grow to know, understand and love the

ProPulse brand.


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Even in the midst of the economic downturn, the industry has maintained steady

growth and Health and fitness products will grow remain resilient as demand from

health-conscious consumers grow. ProPulse has much room for opportunities and

growth in the future.

OUR PRODUCT POSITIONING

ProPulse has what we believe to be an unparallel product offering. Our integration

and innovation in technology in this industry are significantly better than what

competitors are producing.

We offer highly innovative and technology driven products positioned at

middle to high price points that serve superior performance who prefer to exercise to

not only for a healthy body but also for the mental satisfaction derived from using the

product


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MARKET SEGMENTATION

Sport and exercise enthusiasts of varying levels of ability and interest

ranging from novice to professional athlete

Those that recognise the need to have physical activity in their lives

Those that have incorporated some sort of exercise program in their

daily/weekly routine for the last several years

Individuals wanting to further their health and athletic capabilities

Because there are so many different sports and levels at which to compete, there is a

broad range of markets for the company to target. At ProPulse, we will provide a

marketplace that satisfies the needs of each group.

OBJECTIVES: 1. The creation of a unique and innovative company that will differentiate

ProPulse from other brands

2. Educate the community on the importance of health and fitness and what it has

to offer

3. Generate a 2% yearly increase in sales and more than double in the following

years to come

4. Market and cultivate ProPulse's brand awareness and image as the premier

long-term health and fitness products provider.

5. Foster networks and look for future company alliances and affiliations

STRATEGIES

Attract novice fitness enthusiasts

- Engage and provide friendly environments

- offer introductory and free fitness training sessions in order for

individuals to gain confidence in exercise and grow with the brand


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Attract elite fitness enthusiasts / sporting individuals

These clients will provide an important function for ProPulse as the leaders or ‘early

adopters’

- Advertise the latest technologies and innovations in product

- Advertise and show we are providing a state of the art innovation that

will take their capabilities to the next level

Building a Social environment

- ProPulse focuses on building a social presence in the community

through events and sponsorships

Competitive Edge

- ProPulse will follow a differentiation strategy to achieve a competitive

edge in the fitness and health market. ProPulse separates itself from

other brands by providing an integration of various existing trackers as

well as an innovative new blend of technologies.

Promotions/Advertising strategy to help fulfill these objectives:

Planned promotion /advertising type

Expected business improvement

Budget/ Cost ($)

Target date

Social Media: Facebook/ Youtube

help collect feedback, free market research, brand engagement and awareness, engage prospective buyers, far reach across target markets

$10,000 1st October 2012 - Ongoing

Print Media Advertising (Gyms, sporting

Brand and product awareness, advertisement of the

$200 monthly

1st June- Ongoing every two months


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clubs), brochures, sending mailers to target market

launch of the ProPulse product, gaining of prospective clients

Press Release distribution inc. radio advertisement

Brand and product awareness, talk about the core values of ProPulse and communicate that to the audience

$4470 for 4 week period

1 August 2013

Word of Mouth (Referral)

Powerful marketing tool, create a positive buzz about the brand in sporting fitness industry

$0 Ongoing since prototype conception in 2012

Billboard Exposure along busy traffic routes, ability to reach a vast number of middle income earners (Adopt-a-light, 2012)

$20000 for a 3 month period

September 2013 (ongoing every 3 months)

Event: fun run around Albert Park - product launch

Large scale exposure of the brand and product to sporting, fitness, and other individual, promotes healthy living, exercise and fun, Creates excitement, attracts attention, funds

$20000-30000 (depending on permit and event scale size)

October 2013

Free park circuit style/personal training exercises

Drive potential consumer interest, grow commuity awareness

$200 ($50 a session for the trainers)

Once a month – starting from June 2013

Sponsorship of local clubs and sporting events

Promotion of ProPulse with affiliations with sporting and fitness clubs within the community

~$10,000 ongoing from July 2013 and intermittent extra costs dependant on various event dates

Hire sales representatives

Promotion of the brand to retailers and more

$10,000 August 2013


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to representate our brand/image

touch points and brand recognition/understanding

Creation of the website

Connects ProPulse globally, brand awareness and product recognition

$10,000 June 2013

PRICING STRATEGY

The pricing strategy we will be using for our product is cost plus pricing. Therefore

after careful consideration, we have decided that the price for a ProPulse shirt will be

$120 per unit. This is a 70% markup on our costs of production per unit ($50). We

believe that that this price will be highly competitive in regards to our competitors’

products and at the same time will be attractive enough for our end customers.

SALES FORECAST

Sales Forecast: Monthly

$0

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$140,000

2014

2015


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PROPRIETORY ISSUES

Innovation Patent: Although the various technologies are not invented by

ProPulse, we have been granted this application to protect our garment

creation and unique method.

Trademark: In order to distinguish ProPulse, the name, logo and certification

of garment quality we be registered giving us exclusive rights to commercial

use

Design registration will undergo for our ProPulse Garment

Application of Domain name to exclusive right for the website for the

duration of the license period

REGULATORY AND LEGAL ISSUES

Fitness Australia Registration & Code of Practice

Ensures and acknowledges that ProPulse products and services meet the fitness

industry standards and best practice in the Australian health and fitness industry.

Committed to providing customer care, safety and wellbeing and quality service

$800,000

$820,000

$840,000

$860,000

$880,000

$900,000

$920,000

$940,000

$960,000

$980,000

2014 2015

Sales Forecast: Yearly

Sales Forecast: Yearly


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to clients and members.

The Fair Trading Act 1999

Administered by Consumer affairs Victoria to promote and encourages fair

trading practices and a competitive and fair market

The Australian Consumer Law

ProPulse has a duty of care to prevent harm which could reasonably be

expected to occur in the course of providing advice or instruction to clients

Free trade agreement

When dealing with foreign countries, ProPulse must also abide by the various

bilateral Free Trade Agreement.

Trade Marks Act 1995

Exclusive legal right to use, license and sell your intellectual asset in Australia

Crown Land Reserves Act 1978

In order to run events such as the fun run permits had to have been issued by

the Committee of Management (Parks Victoria) and abiding by the Crown

Land Reserves Act 1978 due to the fact that Albert Park is on Crown Land.


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OPERATIONS PLAN

ProPulse will be outsourcing all phases of production. This strategy has eliminated

the need for extensive fixed assets while maintaining flexibility in design and

production. It allows the company to focus attention on sales, marketing, and

product development to establish initial market acceptance. The operational plan

would be conducted in three stages:

Stage 1: Manufacturing

The production of the ProPulse shirt would be divided between its two

main components: the rollable display and the bio-monitoring shirt.

Both components would be produced by two separate contract

manufacturers. After careful consideration and a number of meetings

with different manufacturers, we have narrowed our choices to two

specific companies whom we believe would be able to meet our

expectations. They are:

o Altadox Electronic Design & Manufacturing – Based in China with

manufacturing facilities in Shenzen, Shanghai and Dalian, they

would be responsible for manufacturing the rollable displays that

will be embedded into the ProPulse shirt. Possessing a start of the

art 30,000 sqm facility with the latest production equipment we

are very confident that they will be able to provide the required

quality, manufacturing time frame and production techniques

required to make the component.

o AiQ Smart Clothing – Based in Taipei, Taiwan, they are a market

leader when it comes to manufacturing smart clothing. They would

be responsible for manufacturing the bio-monitoring shirts which

is the most important component of our product. They would also

be responsible for the embedding of the newly manufactured

rollable displays into the ProPulse shirt. We have full confidence

in their ability to deliver as they have a proven track record and

the necessary experience required to produce our product.

In the beginning we would be targeting a production of approximately

1000 units per month. The large capacity of the manufacturing facilities

provides us with an option to increase our production output if we choose

to do so in the future, which will be largely dependent on our future sales

revenues


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Throughout the entire production process, a member of the management

team will make regularly scheduled visits to each of the contract

manufacturers to ensure that the production is going according to plan

and that the quality of the product is not compromised. They would also

advise the necessary personnel if any design changes are to be made.

The newly assembled product will then be exported to our leased 5000

sqm warehouse located in Tullamarine, Melbourne, ready to be

distributed. The responsibilities of shipping the completed unit to the

warehouse will be handed by TNT Express.

Stage 2: Distribution

We will lease ten trucks in order to distribute our product

Each truck will then be loaded up with the product units and will make

periodic calls to the selected Sports & Fitness retailers.

The number of units delivered to each retailer will be dependent on the

quota that was agreed upon during initial negotiations

Stage 3: After Sales Service and Customer Support

We will hire the services of Outware Mobile, a smartphone developer

based in Melbourne to develop the integrated smartphone app for our

product. The app is expected to be available in all four main smartphone

platforms (Windows Phone 8, iOS, Blackberry, Android).

We will also provide after sales support to our customers and hence set

up a customer service call centre in our offices

We would also set up a hotline for our retail partners and manufactures in

regards to any questions or queries that they might have

We will also set up a FAQ section in our website which will be accessible

to customers

In addition to the above we also have a company headquarters is located at St.Kilda, Melbourne. The office would be approximately 400 square feet, with the option of an additional 800 square feet of space, if we decide to expand in the future. The company has a two year lease on the current premises with an additional two year option.

We also have a 600 square feet research lab located in Point Cook, Melbourne where we will be conducting all of our research and development activities in regards to our product.


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CRITICAL RISKS & ASSUMPTIONS

Gina Eom and Ash Khan will share responsibility for the marketing activities. We

will ensure that risks are actively identified, analysed, and managed throughout the

life of the project. Risks will be identified as early as possible in the project so as to

minimize their impact. The strategy for accomplishing this are outlined in the

following sections

RISKS

Risk Likelihood Impact Strategy

Cost overrun or Determining that the business can no longer support itself

Medium

Detrimental to ProPulse if this may happen, The business may no longer exist, we may have debts to pay off

Create a contingency fund - source continuous sponsorship/initiative grants, make sure there is enough so that we may pay off any debt as soon as possible

Problems developing a sufficiently large client base.

Low

not enough business/income coming in to support ProPulse

ProPulse is delivering a unique proposition unlike any other in the market. Consistent branding and other marketing efforts are key so that the client base is being communicated to effectively. Marketing efforts to make sure our message is being sent out to consumers

A member of the board, employee may act to the detriment of the company ProPulse i.e trading information

Low competing brands may acquire our research or other private information

Contracts are set in place along with along with corporate governance guidelines that state the behaviour of all members of the ProPulse Company. Legalities apply to those who break the contract

Delays - e.g production, planned product launch

Medium Affects sales, affect cashflow, changes in marketplace may occur

Strong start up plan to override the risks i.e construction and equipment delivery delay penalties where appropriate

Threat of natural Medium Inurance policies put in place to mitigate


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Assumptions

Assumption management procedures are to be in place and roles and responsibiilities

outlines for clarity of supporting roles and systems

Initial Project Plan;

Organisation chart;

Work Breakdown Structure

Risk Log

Supplier management-related documents

Stakeholder analysis

Benefits Log

Review any additional background documents which may include:

Corporate strategic plan

Information systems and information technology plans

New product releases

Compliance requirements e.g., new regulations

Acquisition or merger plans; or

Other significant project documentation i.e. change management plans, new

product development/release plans

disaster, death of management etc

any uncontrollable risks i.e Property & Casaulty insurance, liability insurance etc

The demand for health and fitness products declining

Low

Affect sales as there is no demand from consumers

Although the industry shows that demand in market is increasing, actively promote the advantages of ProPulse, and health, fitness and exercise in daily life

Competitive Risks High Loss market share/average consumer dollar

Continuous revision of S.W.O.T to find our advantage over competitors, R&D effort to maintain innovation


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- Meetings with the project sponsors and also product steering committee in China to

discuss project assumptions that may exist.

- All facts and figures were calculated under the basic assumption of steady rates re:

Interest rate, tax, payroll etc.

FINANCIAL PLAN

Projected Profit and Loss

Our profit projection for 2014 is $55,461, achieving a 6.49% profit margin.

2015 will see a 11.1% increase in sales, churning a profit of $78,934

representing a 8.21% profit margin.

Across both years we will maintain a gross margin of approximately 58%

(see table 3)

Our R&D spending will decrease in 2015 as we will be focusing on more

incremental changes to the product rather than a radical makeover. R&D

expenses will mostly focus on improving the quality of the product, adding

new functions, fixing any bugs etc. We eventually do plan to increase our R&D

budget again in the future once we have established a firm foothold in the

market.

We have chosen a business model that minimizes fixed costs and accepts a

higher variable costs proportion (50%) until our sales pick up momentum

and we see a sustainable sales rate. In doing this we will reduce the impact of

an unfortunate event where we experience an extended period of low sales

volumes. What we trade off however is incremental profit we would receive

as sales increase, for the fact that 50% of our costs would increase with our

sales.

We have a sizeable marketing and promotions budget that constitutes

approximately 25% of our expenses in 2014, falling to 19% of our expenses

in 2015. It is one of our most significant expenses.

Payroll accounts for 7.5% of our expenses in 2014 and 10.4% in 2015. This is

due to our belief that we would expand our staff in our second year of

operations.

Overall we believe that our estimates are highly promising. A return of 6.49% ($55,461), while at first may not seem significant, is a much welcomed figure for


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a brand new product concept in its first year. As we see from our year 2 projections, there is a significant jump and increase in our net profit which should also indicate a similar pattern for the forthcoming years.

Table 3: Pro Forma Profit and Loss for the year ended June 30

2014 2015

Sales $854,576 $961,398

Less Cost of Goods Sold $356,073 $400,582

Gross Profit $498,503 $560,815

Gross Profit Margin 58% 58%

Expenses

Rent $65,000 $70,000

Warehousing $34,000 $57,000

R&D $120,000 $100,000

Utilities $7,720 $9,000

Payroll $30,210 $45,000

Marketing/Promotion $100,000 $80,000

Insurance $5,200 $7,360

Payroll Taxes $1,900 $3,400

Accounting & Bookkeeping $11,100 $14,150

Transport $27,000 $45,000

Total Operating Expenses $402,130 $430,910

Net Profit Before Tax $96,373 $129,905

Company tax expense $28,912 $38,972

Interest expense $12,000 $12,000

Net Profit $55,461 $78,934

Net Profit Margin 6.49% 8.21%


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Projected Balance Sheet

Table 3

ProPulse

AssetsCurrent assets: 2014 2015Cash 300,000.00 533,000.00 Investments - - Inventories - 140,000.00 Accounts receivable - - Pre-paid expenses 200,000.00 - Other - - Total current assets 500,000.00 673,000.00

Fixed assets: 2014 2015Property and equipment - - Leasehold improvements - 30,000.00 Equity and other investments - - Less accumulated depreciation - - Total fixed assets - 30,000.00

Other assets: 2014 2015Goodwill - - Total other assets - -

Total assets 500,000.00 703,000.00

Liabilities and owner's equityCurrent liabilities: 2014 2015Accounts payable - 140,000.00 Accrued wages - - Accrued compensation - - Income taxes payable - - Unearned revenue - - Other - - Total current liabilities - 140,000.00

Long-term liabilities: 2014 2015Loan payable 200,000.00 200,000.00 Total long-term liabilities 200,000.00 200,000.00

Owner's equity: 2014 2015Investment capital 250,000.00 250,000.00 Government grants 50,000.00 50,000.00 Accumulated retained earnings - (67,000.00) Earnings 130,000.00 Total owner's equity 300,000.00 363,000.00

Total liabilities and owner's equity 500,000.00 703,000.00

Net Worth 300,000.00 363,000.00

Balance Sheet for the year ended 30th June


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EXIT STRATEGY

The owners of ProPulse are establishing this business as a cash flow company for

themselves and as a vehicle to pursue their passion for health and fitness. ProPulse

will provide adequate dividends to the owners, as well as generate enough revenue to

pay off the initial loan in the first three years.

The aim is to go public with an IPO in ten years as the intended exit strategy however

this would depend on the growth, situation will be reviewed at the end of the 5th year.

The owners may eventually exit the business through an acquisition or a sale to

others/each other if the fit an circumstance is appropriate.


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Reference:

ABS (2012). Australian health survey: First results, 2011–12. Canberra:

Australian Bureau of Statistic

IBIS World (2012). The real winners in Australia's battle against the bulge.

Retireved 7th

of May 2013, from

http://www.ibisworld.com.au/about/media/pressrelease/release.aspx?id=293

IMS Research. (2012). World Market for Wearable Technology – A

Quantitative Market Assessment. Retrieved 12th

of May 2013, from

http://imsresearch.com/press-

release/Wearable_Technology_Market_to_Exceed_6_Billion_by_2016

Kang, T. (2006). Textile-Embedded Sensors for wearable Physiological

Monitoring Systems. A dissertation submitted to the Graduate Facultu of North

Carolina State University.

MacDonald, W. A. (2004), Engineered films for display technologies. Journal

of Materials Chemistry. 14. Pg. 4-10.

Parks Victoria, 2013. Retrieved 20th May 2013 from http://parkweb.vic.gov.au/explore/parks/albert-park

Legislation

The Australian Consumer Law, 2012

Crown Land Reserves Act 1978

Fair Trading Act, 1999

Trade Marks Act 1995

propulse business prospectus

Documents