Executive Summary Thousands of Montana state hunters failed to apply for deer and elk special hunting permits in 2012. Why? Because the Montana Department of Fish, Wildlife, and Parks chose to change the special permit application date from June 15 th (which it has been for decades) to March 15 th. Montana is just one of several states that attract applications from across the nation and throughout the world. There are many disappointed Montana hunters this year. It is nearly impossible to keep track of all of the hunting application deadlines and date changes for individuals that apply to hunt in several states. Imagine that you have worked hard to identify certain species of animals across several states that you wish to hunt. You have filled out separate forms and applications for each state and each species, you have identified where you want to hunt, and now you are waiting for the application period to open before you can begin submitting your mountains of applications then you learn that the application deadline was changed and you missed your chance. Even the avid hunter, as a result of policy changes, suffers from application anxiety. More often, it is the seasonal hunter that is victimized. Most states offer special permit applications to limit hunter access to the most promising regions of the state. These applications are conducted in the spring after states calculate variances from sustainable levels of wildlife populations. During the spring, however, seasonal hunters are not sufficiently focused on hunting to remember to submit their applications. We propose to alleviate hunter anxiety associated with these special permit applications by submitting them each year on behalf of our clients. There are more than 12.5 million hunters in the U.S. that spend more than $700 million each year on license, tag, permit, and stamp fees to state wildlife departments. There are just over one million hunters each year that apply for out-of-state hunting permits, but another five million hunters that apply for special hunting permits within the states they reside. Never Miss target market includes both resident and non-resident special permit applicants. The total market size, billed at our proposed pricing, would generate $374.2 million in annual revenue. We estimate fifteen percent resident and non-resident market penetration for the state of Montana within five years. We further estimate nine percent resident and 1.28 percent nonresident market penetration for the remaining U.S. market within five years. 1 The projected market penetration would result in $7,654,764 in annual revenues by 2016. Net Income in 2016 1 See Appendix A for Never Miss Market Penetration Assumptions.
is projected to be $2,773,968. The NPV of this opportunity is $4,572,381 discounted at 30 percent. The business concept has a 213 percent IRR 2. Non-resident special permit applications require payment of all tag fees at the time of application. These fees average $1,050 per tag for the 73 most popular non-resident big game applications. The average applicant simply cannot afford to apply for more than just a few special tag drawings. We propose to finance the tag fees (which are refunded if the client is unsuccessful in their application process) for our clients. This will be a powerful tool to drive demand for our services and to better-enable our clients to apply for more of the coveted tags they desire. We will target the cost-averse special permit applicant who does their own research, knows where they want to hunt, and often plans to self-guide their hunts once they are successful in drawing their tags. This niche is completely neglected from existing competitors who focus on providing services to the hunting elite, and charge thousands of dollars to their clients for consultations, recommendations, and ultimately the service that we are offering application assistance. Existing competitors would need to completely change their product offering in order to compete in our niche. Our target market is not currently serviced. The Never Miss product will be fully automated and online. These efficiencies will result in extremely low overhead and operating costs that more closely resemble fixed costs than variable costs. Revenues will be similar to annuity payments, in that clients typically draw for the same coveted special permit tags every year of their life, or at least until they draw the tag, which for highly coveted tags, is likely to take over twenty years. Dan Bateman, CEO of Never Miss, founded and ran a successful offshore software development company in India for three years. He has personally built hundreds of front-end software applications, and is designing our product. Additionally, his offshore contacts will enable us to hire software development at very moderate rates. Software development costs and marketing expense will represent the majority of the required startup capital. We seek funding of $75,000 dollars, which will finance our initial marketing and software development costs. Cash flows are extremely seasonal, but operations will be sustainable by February, 2013. Equity investors are projected to realize their returns during an exit strategy maturing between years five and six. This exit strategy may be from equity repurchase or we may approach Cabella s to purchase NeverMiss. Thank you for your consideration. 2 See Appendix B for Never Miss NPV and IRR Calculations.
Table of Contents Company and Product Description 1 Customer Analysis 2 Competitor Analysis 5 Marketing Plan 7 Operations and Development Plan 11 Entrepreneurial Team 14 Critical Risks 14 Financials 16 Offering 18
Company and Product Description Regardless of your opinion of whether hunting is humane, the human race has been a hunter since the dawn of time. Nationally, there are 12.5 million hunters that take to the field each year in the U.S., and they spend more than $220 billion per year on their hunting-related endeavors 1. Approximately $700 million of that revenue is paid in license, tag, permit, and stamp fees to state wildlife departments. Those fees finance wildlife habitat preservation. Departments of fish and game in every state use hunters to keep wildlife populations sustainable. Since this population control is the mechanism that drives availability of hunting permits, the application process in most states has become quite complex. Montana, for example, has hundreds of different hunting regions in 2012. Those regions differ from species to species. Special permits are issued for regions where hunters most want to hunt. Montana has ten different big game species, seven different special permit application deadline dates, and a listing of 93 different types of license combinations for purchase. In spite of that complex maze of options, over 19 percent of the population of Montana (on average) hunts each year. Most hunters suffer from a seasonal obsession. Hunting for most species occurs in the fall, and is a regular point of discussion and thought during that season. Special permit applications are only available for several weeks, and must be submitted during the spring and summer months when hunting is not always a point of focus. Many hunters forget to apply for their coveted special permits. Many others are stressed that they are going to forget. States, occasionally, even change the deadlines, resulting in missed applications. Never Miss proposes to alleviate that stress by submitting special permit applications on behalf of our clients each year. The client simply inputs the species and regions they wish to hunt, and with a click of a button, the stress of remembering to apply goes away. Another source of hunter pain is the cost associated with applying for those permits. Most state departments require that you pay for your hunting tag when you apply for a special permit. If you do not win the lottery and draw your tag, you are refunded your tag fees. In Montana, an applicant who applies for special permits for deer, elk, antelope, bighorn sheep, moose, and mountain goat species will front $445 in tag fees (if they are a MT resident), or $3,382 in tag fees (if they are not a MT resident). 1 As reported by the U.S. Fish & Wildlife Service in their last published National Survey. See http://wsfrprograms.fws.gov/subpages/nationalsurvey/nat_survey2006_final.pdf. Page 1
Residents of Montana who apply for the most competitive special permit tags in their home state are unlikely to draw any of the tags they apply for. The most coveted hunting districts for each of the species previously listed have odds of drawing a hunting tag ranging from one in seven for antelope to one in 402 for Bighorn Sheep. Statistically, Montana hunters should expect to apply for 28 years 2 before they have drawn each of those coveted tags 3. In order to increase the odds of drawing a tag, hunters should apply to hunt more species, and better yet, apply to hunt across several states. Tag fees, however, often limit the number of applications a hunter can afford to submit. If you had resources available to hunt bighorn sheep in any state, you could apply for permits in Arizona, Colorado, Idaho, Montana, New Mexico, Oregon, Utah, Washington, and Wyoming. You would be seven times more likely to draw a tag, but you would need to front $15,438 in tag fees 4. Even with the increased odds, your chance of drawing any permit would be just 3.1 percent. The odds of drawing two permits, in the same year, would be one in 9,382. Never Miss proposes to float tag fees as an added service to attract clients and to increase the number of special permits they can afford to apply for. Our competitive advantage includes the ability to design our product in house and outsource a fully automated online product with known offshore associates at cost. Additionally, the product offering that we propose is unique to the market place and targets an un-served population. Competitors would need to completely change their product offerings and corporate cultures before they could enter our niche market. Our low-cost pricing is established to make market entry by competitors unattractive. Never Miss plans to be incorporated in the State of Delaware. Customer Analysis During phase I, our customer base will be Montana hunters. Montana accounts for 1/13 th of all national hunting tag applications each year. During our phase II launch, Never Miss will target hunters on a national scale, with subsequent expansion into international markets. Never Miss will have two customer segment groups. One group will be residents of the state in which they wish to hunt. These hunters will benefit from never missing a hunting application. Our second 2 Odds increase each year a hunter is unsuccessful in states that have point systems in place. Montana is one such state, where unsuccessful applicants are awarded a point (additional chance at drawing a tag) for each year they apply, but are not awarded a tag. The calculation of years includes the impact of those awarded points. 3 Based on 2009 drawing statistics for the State of Montana, see http://fwp.mt.gov/hunting/planahunt/drawingstatistics/. 4 Taken from hunting regulation fee schedules from each of the listed states. Page 2
customer group will consist of hunters who apply for multiple tags in multiple states each year. This segment will benefit from only filling out one application with Never Miss, and from being able to finance their tag fees. Montana Consumers 5 There are approximately 197,000 people that hunt in Montana each year. Of these hunters, 145,000 are residents of the state. Residents comprise 74 percent of the hunters in Montana, and spend approximately $11 million per year on hunting tags. 52,000 people on average travel to Montana to hunt each year and spend over $24 million on non-resident hunting tags. Out of the 197,000 hunters in Montana, 182,000 specifically focus on hunting big game. During phase I, Never Miss will target the Montana resident hunters and those who travel to Montana to hunt. National Consumers 6 In the United States, 12.5 million people hunt. Big game hunting is the most popular type of hunting. Out of all hunters, 10.7 million focus primarily on hunting large game. These 10.7 million hunters in the United States represent our primary target market, as they are required to submit applications to hunt these animals. $700 million is spent by hunters annually on licenses, stamps, tags, and permits. National Resident and Non-Resident Hunters 6 Due to convenience and cost of applying for out of state tags, the majority of hunters in the United States only hunt within their home state. 85 percent or 10.6 million hunters only hunt within their state of residence. Four percent of all hunters apply for out of state tags only. 5 Based on 2009 drawing statistics for the State of Montana, see http://fwp.mt.gov/hunting/planahunt/drawingstatistics/. 6 Customer analysis data taken from the 2006 National Survey of Fishing, Hunting, and Wildlife-Associated Recreation report and the 2006 National Survey of Fishing, Hunting, and Wildlife-Associated Recreation reports published by The U.S. Department of the Interior, see http://www.census.gov/prod/2008pubs/fhw06-nat.pdf. Page 3
Age and Sex 7 Out of the total United States population 16 and older, 10 percent of males and one percent of females hunt. Of the 12.5 million hunters in the United States, 91 percent, or 11.4 million are male and nine percent or 1.2 million are female. 48 percent of all hunters are between 35 and 54 years of age. 3.1 million hunters are between 35 and 44 years old, and 2.9 million hunters are 45 to 54 years old. Household Income 7 Participation in hunting tends to increase as the household income increases. The majority of hunters have household incomes of $50,000 or more. Households with incomes between $50,000 and $99,000 have the highest participation rate at eight percent. Seven percent of individuals living in households that make over $100,000 annually participate in hunting. Only two percent of people hunt that live in households making under $10,000 per year. Never Miss will primarily target customers that live in households that make anywhere from $30,000 to $75,000 annually. Race 7 Out of the total 12.5 million hunters in the United States, 96 percent are white. Two percent of hunters are black, and the remaining two percent are made up of other races. 7 Customer analysis data taken from the 2006 National Survey of Fishing, Hunting, and Wildlife-Associated Recreation report and the 2006 National Survey of Fishing, Hunting, an d Wildlife-Associated Recreation reports published by The U.S. Department of the Interior, see http://www.census.gov/prod/2008pubs/fhw06-nat.pdf Page 4
Education 7 Over half the hunters in the United States have had 12 years or less of formal education. Hunting participation rates are highest for individuals with 12 years of education at 39 percent. Individuals with less than 12 years of education make up 14 percent of all hunters. 26 percent of all hunters have completed one to three years of college. Seven percent of all hunters have completed five or more years of college. Competitor Analysis Never Miss Competitors: Cabela s T.A.G.S. (Trophy Applications and Guide Service) is our closest and largest competitor. They offer a full service licensing program that provides professional consultation on where applicants should apply, and how to begin building preference or bonus points to increase their odds at successfully drawing the most coveted hunting tags for 18 species, located in 16 states. They make their recommendations based on the desired trophy quality, the hunters physical ability, their acquired point status, time constraints, whether they want to hunt with or without a professional guide, and the most recent regional information. They target non-resident Page 5
applicants and submit hunting applications on behalf of their clients. They finance tag fees to attract clients and to maximize the number of regions where applicants apply for permits. Ninety percent of their clients allow the Cabela s T.A.G.S team to select where the applicant should apply. Cabela s charges fees from $57.50 to $264.00 per permit application for this service, with an average fee of $103.88. USO (United States Outfitters) is a front for outfitter services. They will help you draw a tag, but once you are successful, your pricing is based on paying their union of outfitters handsomely to guide your hunt. USO submits hunting applications for their clients, and in most cases, fronts the tag fees. They provide annual consultations with clients to customize the application process to the clients desires. USO charges $120 for their initial consultation (per application), and then submits the application in perpetuity at no charge until the client draws the tag. The reason they can offer this service so inexpensively, is because they make their money on the back end, when the hunter pays them to guide their hunt. They are the outfitter. Huntin Fool sells themselves as North America s premier hunting consultants. They provide research, statistics, and consultations to assist members to decide where to hunt. They also provide hunting application services for 21 western states and Alaska. Their basic fee is $50 for the first species application per state, and $10 per each additional species in that state. Huntin Fool does not float the tag application fees for their clients. Page 6
HuntersDomain runs a business called BigGameTags.com. They provide limited services to hunters by coordinating client applications with sponsoring resident landowners. Landowners, in some states, may purchase landowner tags that they may then resell. This website is an auction service for those landowner tags. Marketing Plan Never Miss has several large competitors already offering hunting application assistance, but Never Miss will set themselves apart through product differentiation, business location, and a lower pricing strategy to target a larger demographic. Product Differentiation Never Miss specializes in helping hunters across the nation fill out and process all their hunting applications. By completing and submitting all of our customer s big game hunting permits, we ensure our customers will never miss another hunting application deadline. Unlike our biggest competitors, Never Miss offers a very simple and user friendly service. Our largest competitor, Cabela s, offers a full-service licensing program, including professional consultation on the location of where their customers should apply. Because of this service, Cabela s main clients are non-resident hunters. They also charge high prices for this consultation. Never Miss will disrupt the hunting application process by providing a simple and affordable service for all hunters. Our online tool will collect our customer s information, along with the locations and species they wish to hunt. It will then submit hunting applications for special permits for as long as the customer subscribes to our program. Never Miss is set apart from our competitors in the ease of our process. We will streamline the application process for hunters without pressuring them into having a consultation or using an outfitting service. Another point of marketing differentiation is the appeal associated with a small Montana business. Montana is one of the country s premiere hunting locations. Some clients will prefer to have their hunting applications processed by a small Montana business rather than by a corporate giant, like Cabela s. We will promote our Montana business location in all of our marketing materials. Page 7
Pricing Strategy Because of our simplified business model, Never Miss will be able to charge significantly lower prices than our competitors. Offering a similar service for a substantially lower price will not only draw some clients away from our competition, but it will also broaden the pool of potential clients. Lower priced services will also attract customers who previously had not considered using this service. Never Miss plans on charging $29.95 for up to two applications plus $9.95 for each additional application. This is significantly lower than our direct competitor, Cabela s. Cabela s fees range from $57.50 to $264 per application, with an average of $103.88. A hunter applying for three permits would pay $39.90 through Never Miss, while the same hunter would pay, on average, $311.64 with Cabela s. Hunters applying for specialty tags would also benefit from using Never Miss over our competitors because the application fees do not change based on the state or species selected, they are constant. Distribution Channel Never Miss distribution will be entirely online. The domain nevermisstags.com has been purchased, and the front-end development is nearing completion. The focus of the development is to deliver a simple experience for the client. The client will access the website and create a user account. Within this secure account, the customer will provide their basic contact information, demographic information, hunting registration numbers, and credit card information. They will also select where they wish to hunt from a list of available regions. The client will submit a contract for services and a power of attorney. After that, the client s work is finished. Never Miss will complete and submit all of the requested hunting permit applications and front all requested special permit fees year after year. Advertising and Promotion Advertising and promotion for Never Miss will be broken down into two separate phases. During phase I, Never Miss will target Montana special permit applicants only. This will include both resident and non-resident hunters. This will enable Never Miss to test pricing, marketing, and software platforms thoroughly prior to a national launch. During phase II, Never Miss will launch nationwide, providing special permit applications to all fifty U.S. states. Phase I-Montana Marketing Our marketing efforts in Montana will focus on low-cost opportunities. Never Miss will start by attending all four of the Great Rockies Sports Shows. These outdoor sporting shows are held annually in Billings, Kalispell, Great Falls, and Bozeman, and attract thousands of visitors each year. The total exhibitor fee for all four shows is $1,824. With an additional $600 for travel expenses, attending the outdoor show series will cost $2,424 each year. Page 8
Never Miss will also send a promotional flyer about the launch of our new business and website to 1,000 of the Rocky Mountain Elk Foundation Members. At $0.59 each, this will cost $590. Never Miss will also create advertising flyers to distribute at major sporting good stores across Montana. 10,000 flyers at $0.06 will cost $600, plus $750 for staff travel for a total cost of $1,368. We plan to partner with local sporting good stores and retailers to cross-market each others goods and services. We hope to negotiate the ability to post advertisements in partner locations and have check-out clerks distribute promotional flyers. The primary cost of this promotional method will come from the cost of printing the flyers. Distribution of these flyers is expected to cost $750 per year. While we develop our marketing campaign to customers, we hope to culture a relationship with Montana Fish, Wildlife, and Parks (FWP) to provide free marketing. Never Miss products will benefit FWP by increasing revenues, as fewer hunters forget to apply on time, and as more hunters can afford to apply for additional special permits. In exchange for this increased revenue, our hope is that FWP will agree to promote our business on their website and in their materials. Successful implementation of this initiative should open the door to similar opportunities in other states. The total marketing cost for phase I will be $5,135 annually. Phase II- National Marketing During phase II, the marketing budget will increase significantly, as we expand our reach to a national target audience. This expansion will be aggregate to Phase I marketing efforts. On the national level, Never Miss will attend national trade shows, run advertisements in popular hunting magazines, and purchase online advertising. In addition to our Montana trade show, Never Miss will attend the Pacific Northwest Sportsman Show, the largest outdoor show in the Northwest United States. The exhibitor fee for the five day show is $1,100. Travel expense is estimated at $1,500, for a total of $2,600. Never Miss will advertise in affordable, but popular, hunting magazines. Hunting Illustrated charges $695 for a 1/3 page color ad, and reaches 48,500 readers. Similar ads in Deer Hunting magazine cost $1,820 for an audience of 225,000. Research suggests readers must see ads at least three times before they will remember the information. Never Miss will run ten ads in each magazine each year. It will cost a total of $25,150 per year to reach an audience of 273,500 with ten different ads. Page 9
Never Miss will incorporate online advertising into our national marketing campaign. Using Google Ads you can pay for your advertisement to appear when people search for related keywords. We plan to bid the keywords hunting tag and hunting permit, and have our ad appear next to the search results. These key phrases are searched on average 112,900 times each month. Never Miss ad would randomly pop up next to hunting searches. We will pay approximately $0.37 each time the ad is clicked. Clients will then be taken directly to our website. Our growth estimates are based on an estimated click-through rate of twenty percent and a conversion rate of ten percent. These rates are based on industry standards. We will initially set our Google Ads monthly limit at $1,500, for a total annual cost of $18,000. Upon conclusion of phase I, we will assess our Google Ads return on investment. If conversion rates are in excess of 0.93 percent the marketing will be profitable, and we will increase the monthly limit significantly. We estimate that at a twenty percent click-through rate, we can reach 270,959 potential clients each year, but at a cost of $100,255 per year. The national marketing efforts will add a minimum of $45,750 in marketing costs annually. Combined with Montana strategies, the total marketing cost will be $50,882 per year during phase II. Excess revenues during 2013 and 2014 will be diverted to marketing wherever feasible. We have budgeted expenditures of $99,684 for marketing expense in 2013, increasing to $205,470 by 2016. Page 10
Operations and Development Plan Operations Strategy In order to provide a quality service, it will be imperative that Never Miss stay abreast of changes in state special permit and tag application dates, fees, and hunting regions. These data sets change regularly, and we must be ready to adapt our system to those changes immediately. As we develop our database, we will make certain that variable data sets are easily updated. Delivery of our Phase I product will be limited to MT permit applicants only. We love our fellow state residents, and we look to their feedback during our initial launch to learn how to best structure ourselves for national expansion. We will listen carefully to their comments and concerns. We will also carefully experiment with marketing, pricing, and service models to best prepare ourselves for a successful national launch. We plan to expand our services first to the ten most popular western states for Big Game hunting, and after that target expansion, state by state, based on the number of resident hunters. The following chart shows the projected market penetration, beginning with MT and expanding to all U.S. states. Site Development State special permit applications will be duplicated in our system, and all requested fields of data will be built into our database. Our online application form will request all data required on state applications for the regions our clients choose to apply. When applications are due, Page 11
our system will auto generate the applications and submit them electronically when possible, and by mail as needed. Since our clients only have to complete the application once, they are saved the hours of unnecessary repetition they would otherwise have to endure to apply to multiple states and/or for multiple species. Better yet, they do not have to do anything in subsequent years, unless they wish to change the application data stored in their online profile. Front end development has begun, and an agreement has been made between Property Solutions International, Inc. and Never Miss to provide a team of twenty backend coders for free. This development will be used as a training module for a new team of twenty open source developers. I will hire a project manager, but all subordinate coders will be provided at no cost. Once the backend is fully developed, the project manager will recruit offshore staff to maintain the site and oversee product enhancements and revisions. Development will be ongoing, since regional hunting data is ever changing. These development demands will be seasonal, with an influx of changes occurring each spring. During the rest of the year, the development team will explore site enhancements including statistical tools to help our clients improve their odds of selecting the best states, regions, and areas to hunt. We plan to target an audience that does their own research, but we will arm them with the information they need to do that job well. Ongoing operations Never miss will be a primarily online business and therefore can benefit from remote on demand storage and development costs. In this aspect, Never Miss will save on overhead associated with a traditional brick and mortar location. As an online business, Never Miss will be available to the customer 24 hrs a day. Customer service will be handled primarily via email. A customer service help line will be available for those that have difficulty or questions filling out the required online forms. Never Miss will initially be available during regular business hours and will expand service hours to correspond with release dates for applications and deadlines. As phase I rolls out, Never Miss will identify peak demand volume and hours for customer service, and will staff company representatives appropriately during our phase II launch. Our entrepreneurial team will personally handle customer relations during phase I, but will add phone representatives to cover increased demand during phase II. Development Timeline Front-end site development has already begun, and should be complete by July, 2012. Never Miss will require equity financing to fund the back-end development costs. Should Never Miss opt to split equity financing into annual offerings, they will seek phase II national expansion funding after successful implementation of phase I (through Aug 2013). Phase I financing will cover phase I marketing and operational costs, as well as phase II site development. Never Miss Page 12
will be able to demonstrate a functional phase II product to potential investors of phase II financing. Illustrated below is a product launch timeline, which demonstrates phase I and phase II development schedules. Phase I is scheduled to launch fall of 2012. We will be simultaneously managing phase I operations while building the infrastructure for Phase II expansion. The delayed phase II launch will enable Never Miss to identify and correct operational and functional site deficiencies while operation costs and workloads are managable for the team. The experience gained from phase I will help to identify and prevent unforseen problems associated with the national launch. Page 13
Entrepreneurial Team C. Daniel Bateman, CEO Dan Bateman was raised on a Montana ranch, which he now manages. Dan has fifteen years experience hunting in Montana, Utah, Washington, and Arizona. Dan has also guided upland bird and deer hunters on his ranch. Dan received his Bachelor s degree in Business with a Finance emphasis from Montana State University. Post-graduation, Dan worked as a financial analyst for a Fortune 500 company for ten years. Dan was the founder and CEO of WitSource Global Solutions, an offshore software development company in India. His experience there will enable him to custom design the front-end application of the Never Miss website. His offshore contacts have enabled Never Miss to secure a twenty-person development team at no cost for a period of six months, beginning in July 2012. Those same offshore contacts will enable Never Miss to outsource future back-end development without middle-man margin costs. Dan is currently employed as CFO of Rural Dynamics Inc., a MT-based non-profit organization. His finance background will ensure that corporate objectives are limited to those that demonstrate responsible and profitable growth for the organization and its investors. Dan is enrolled at the University of Montana, earning his MBA through their executive distance learning program. Dan s unique background enables him to communicate with ranchers, outfitters, hunters, and corporate executives on their level. Critical Risks During development and launch of the new business, Never Miss will face several serious risks. Depending on the severity of each, these risks have the potential to be damaging to the business plan and revenue projections. The first risk Never Miss faces is not gaining enough market share. Never Miss has many upfront costs in website development and marketing expense. We are also is charging lower prices than our competitors, so if we fail to gain a large enough market share, we could struggle to cover these expenses. Never Miss must draw customers away from competitors as well as broaden the market through lower prices to ensure gaining a large enough pool of clients. In Page 14
order to cover fixed and variable costs in year 5 we will need to have acquired 59,962 clients, or 0.48 percent market share. Never Miss also faces the risk of falling behind schedule and not being able to launch their product into all 50 states by spring of 2014. Never Miss is targeting both resident and nonresident hunters. These clients will want to have all their applications filed by one company. During phase I, Never Miss will target Montana hunters but will also be promoting the future expansion of the site. If the expansion does not happen on time, some customers may be dissapointed with the service. To mitigate this risk, Never Miss will closely moniter the progress of the development team. If at any point they are falling behind schedule, we will hire additional developers to ensure the expansion meets its deadline. Hiring additional developers would increase development costs by $3,000 per month. Never Miss assumes a level of default risk by floating client tag fees. To provide this service to our customers, Never Miss must secure a line of credit that increases annually to meet demand. That line of credit will need to increase to a level of $68 million by year five. Never Miss projected financing requirements are as follows: $6,407,164 for 2013, $19,081,522 for 2014, $38,115,865 for 2015, and $68,188,234 for 2016. Assuming Never Miss will be able to secure this high of a credit line is a substantial risk. Another risk Never Miss may face is current competitors shifting their focus to offer a low cost service. For example, as Never Miss gains clients, Cabela s could introduce a cheaper permit application service. Even though it is possible, it is unlikely that competitors will shift their focus to compete on cost. Never Miss competitors currently target the high end of the market. To compete on cost they would need to completely change their marketing focus. As Never Miss fosters low-cost product awareness, new competitors may be tempted to enter this market. If this were to happen, Never Miss would still have several competitive advantages over new entrants. First, Never Miss has the advantage and appeal of being a Montana based business. Our CEO, Dan Bateman, has connections in India that enable them to hire software engineers at offshore wholesale cost. Consequently, Never Miss development costs will be lower than those of our competitors. New entrants would not be able to compete with our low startup costs. Page 15
Financials 8 Revenue in year two will be a result of the phase I (MT market only) product offering. The majority of revenue growth in years three through five will come from phase II (National market) expansion. Estimates are based off a total U.S. market penetration of 1.26 percent after five years. There are three sources of revenue. The first is application agent fees, followed by financing fees, and advertising revenue. Each is projected to represent 80.2 percent, 17.8 percent, and 2.0 percent of the 2016 revenue respectively. Operating Expenses include interest expense associated with financing of tag fees, marketing initiatives, personnel wage and fringe costs, and office expense. Financing fees are estimated assuming a six percent interest rate on projected client financed fees for an average period of 69 days per year. Marketing expense assumes positive ROI for google adwords, resulting in expansion from initial budget to purchase placement for all online searches matching our search criteria. It also increases national trade show activity, which will be swapped for magazine or television advertisements if they generate a better ROI. Personnel expense grows in harmony with sales. Customer service staff will be hired as soon as demand exceeds management s capacity, and is estimated to grow by one customer service rep for each 5,000 new clients. Direct sales team members will also be hired to service trade show booths, seek outdoor shop partnerships, and coordinate expansion with the Director of Marketing. By the end of 2016, Never Miss will have created 48 new jobs. No physical office will be used for operations until the start of phase II (January, 2013), when customer service and sales staff will begin to be recruited. 8 See Detailed financials in Appendices C through H Page 16
Initial marketing and site development will require a one-time capital investment of $75,000. Never Miss will seek debt financing to limit the equity requirement. Cash Flow from operations are projected to be negative for the first seven months of operations (through February, 2013). The automated nature of our product ensures very high gross margins. Expenses will not increase at the same rate as revenues. The annuity nature of the revenues helps guarantee growth, as well-serviced clients use the product year after year. Page 17
Offering Never Miss will require financing of $75,000 in order to fund development, marketing, and operational expenses during startup. Never Miss will also require a line of credit to finance non resident client tag fees. The line of credit will not be used to fund operations, and will only be needed seasonally during peak application periods (primarily March through June). Equity investors are projected to realize their returns during an exit strategy maturing between years five and six. Never Miss plans to either repurchase equity stakes from initial investors beginning in year five or seek acquisition by Cabella s. Page 18
Appendix A Never Miss Market Penetration Assumptions
Appendix B Never Miss NPV and IRR Calculations
Appendix C Never Miss 2012 Pro-forma Income Statement
Appendix D Never Miss 2012-2016 Pro-forma Income Statements
Appendix E Never Miss 2013 Pro-forma Income Statement
Appendix F Never Miss 2014 Pro-forma Income Statement
Appendix G Never Miss 2015 Pro-forma Income Statement
Appendix H Never Miss 2016 Pro-forma Income Statement
Appendix I Never Miss 2012-2016 Pro-forma Statement of Cash Flows
Appendix J Never Miss 2012-2016 Pro-forma Balance Sheet