Section 2

Team 13
Fall 2016

Business Plan

Business Name: SmartShower LLC.

Business Idea: SmartShower is a revolutionary shower head that tracks the amount of water youve
used during your shower and alerts the user when they start to be inefficient. Green, orange, and red
LED lights surround the shower head to indicate how much water youve used as time goes on. Our
product also has a built in atomizer to give the flow of water a consistent, high pressure feel that
enhances the customers showering experience.

Team Members: E-mail

Ashton Clarke clarkead@dukes.jmu.edu

Jack Floydd floyddja@dukes.jmu.edu

Matthew Jurcisin jurcismm@dukes.jmu.edu

Tucker McCoy mccoytm@dukes.jmu.edu

Theodore Sackos sackostg@dukes.jmu.edu

Brianna Tarzia tarziabn@dukes.jmu.edu

Alexandra Vidas vidasal@dukes.jmu.edu

1
 Executive Summary
SmartShower
Tucker McCoy
2802 N 37 Avenue, Phoenix, AZ 85009
Phone: (540) 209-2817
E-mail: mccoytm@dukes.jmu.edu

Management: President, Vice President Business Description: Our company

of Operations, Vice President of sells an EPA approved showerhead to
Marketing, Vice President of Finance help conserve water.
Products/Services: SmartShower is an
Industry: Bathroom Appliances Industry eco-friendly showerhead that uses LED
lights to notify the user how much water
Number of Employees: 20-23 has been used during their shower, and
when they start to waste water. A water
Amount of Financing Sought: turbine powers the LED lights. We are
$1,100,000 projected to sell 45,206 units in our first
Investment Sources: year. Our product will be sold at $59.99
Board of Directors: $150,000 and it costs $7.30 to make each unit.
Angel Investors: $500,000 Competitive Advantage: Our product is
Friends and Family: $200,000 easy to use at a cheaper price than our
Long Term Business Loan: $250,000 competitors.
Markets: Our target market focuses on
Use of Funds: product parts, fixed assets, the southwest region of the United States.
initial inventory, warehouse rent, salaries We are mainly focusing on residents who
and wages, office equipment live in water deficient areas, but we also
want to target young environmentally-
Product/service selling price: $59.99 conscious adult
Distribution Channels: We are a Business-To-Consumer company that plans to sell our
product through an online website (following a rigorous promotion campaign). After the
first five years, we plan to also become a Business-To-Business seller, distributing our
product through retailers.
Competition: Our current brand competition is the Hydrao Smart Shower Head because it
also tracks water usage and lights up as it goes along. However, we differentiate with our
price, ease of use, location, and certifications. We also have product competitors in Delta,
Kohler, and Speakman because they sell showerheads as well but not ones that are similar to
ours because they dont have any additional features.

Financial Projections (Unaudited):

2018 2019 2020 2020 2021
Revenue: $2,711,908 $2,994,461 $2,928,172 $3,041,973 $3,066,296

EBIT: $1,240,317 $1,454,484 $1,365,963 $1,363,005 $1,379,672

2
Narrative

Do you ever wonder how much water you use while showering? Do you ever think,

why was my water bill so expensive last month? Well then SmartShower is the product for

you! SmartShower is a showerhead that tracks the amount of water youve used during your

shower and alerts you when you start to be inefficient. Green, orange and red LED lights

surround the showerhead to indicate how much water youve used as time goes on. Our

product also has a built in atomizer to give the flow of water a consistent, high pressure that

enhances the customers showering experience. SmartShower provides useful information to

help cut water bills and conserve water, making it a great investment for those looking to

save money as well as help the environment!

The Southwest region of the United States has a high number of droughts. We hope

that SmartShower becomes an essential tool of southwestern residents, because water

conservation is crucial there more than ever nowadays. We will help these residents be more

efficient when using water by quickly notifying them when they need to start hurrying up in

the shower. SmartShower will be a great way to help decrease their water bills as well. Along

with that, more young adults are starting to become more conscious of the environment, and

the millennial generation has helped lead that trend. According to Pew Research Center, the

size of the millennial generation is 75.4 million people, and 32% of millennials say that they

are willing to pay more for eco-friendly products. SmartShower is the perfect showerhead for

eco-conscious millennials due to the fact it will help conserve water and prevent them from

wasting more money on water utilities. Allowing customers to help save the environment

and save money is what adds value to our product.

A water turbine within the showerhead powers LED lights around the edge of the

product. The amount of water used is determined by minutes in the shower. These LED

3
lights will notify the user through green, orange or red lights. The green lights mean the user

is efficiently using water (0 to 9 minutes), orange means that usage is efficient but you need

to start to wrap it up (9 to 15 minutes), and flashing red means the user is using a wasteful

amount of water (15+ minutes).

SmartShowers competitive advantages over our closest competitor (Hydrao) are our

price point, ease of use, and certifications. The Hydrao showerhead is being sold for $99.99

in France, while ours is $59.99 in the United States. This means that our market is relatively

untapped, and we are more affordable. The Hydrao has Bluetooth capability and an app built

for it, which requires more technology inside it and is why its more expensive than

SmartShower. This also makes our product easier to use, because the customer doesnt have to

do anything in order to see the most relevant information they need. Lastly, our product will

be approved by the Environmental Protection Agency. There is a WaterSense Plastic Shower

Sprayer Socket inside of the shower that dispenses less than 2.0 gallons per minute while

having a spray force of more than 2.0 ounces. This is required to receive the WaterSense

label, and the Hydrao does not have this cap. We plan on patenting the process to create our

showerhead as well.

Our promotion team is responsible for advertising our product through social media

websites along with promoting to potential future retailers after 2022. After the first five

years we plan to begin selling to retailers such as Bed, Bath, and Beyond and Target. Our

operations team will be inspecting each individual product before it is shipped out from our

warehouse in Phoenix, Arizona. This location was chosen because it is near the center of the

southwest region where our target market lives. We will not have any outsourced functions

except for a product development and design consultant, who will help with the engineering

side of our product for the first five years while we work out any kinks.

4
Exhibit 1: Organizational Chart
SmartShower
Year 1

President

VP VP VP Finance
Marketing Operations

Customer Warehouse Maintenance

Promotion
Service Workers and Security
Team (2)
Representative (10) (3)

*There will be three additional warehouse workers added after Year 3, and expensed in Year 4

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Exhibit 2: Employee Costs Chart
Position Salary Range Projected 1st Payroll Deductions Benefits Total Costs
Year Salary
President $35-40,000 $37,552 FICA (7.65%)- $2,872.73 Standard $47,912
SUTA-$313
FUTA-$107
WC (1.3%)-$488.18
Total-$3,780.91
VP Operations $30-35,000 $31,919 FICA (7.65%)- $2,441.80 Standard $41,775
SUTA-$313
FUTA-$107
WC (1.3%)-$414.95
Total-$3,276.75
VP Marketing $30-35,000 $31,919 FICA (7.65%)- $2,441.80 Standard $41,775
SUTA-$313
FUTA-$107
WC (1.3%)-$414.95
Total-$3,276.75
VP Finance $30-35,000 $31,919 FICA (7.65%)- $2,441.80 Standard $41,775
SUTA-$313
FUTA-$107
WC (1.3%)-$414.95
Total-$3,276.75
Promotion Team (2) $20-25,000 $23,061 FICA (7.65%)- $1,764.16 Standard $64,249
SUTA-$313
FUTA-$107
WC (1.3%)-$299.79
Total-$4,967.90
Customer Service $20-25,000 $23,061 FICA (7.65%)- $1,764.16 Standard $32,124
Rep. SUTA-$313
FUTA-$107
WC (1.3%)-$299.79
Total-$2,483.95
Warehouse Workers $17.5-20,000 $19,602 FICA (7.65%)-$1,499.55 Standard $283,559
(10) SUTA-$313
FUTA-$107
WC (1.3%)-$254.83
Total-$21,743.80
Maintenance/Security $17.5-20,000 $19,602 FICA (7.65%)-$1,499.55 Standard $85,068
(3) SUTA-$313
FUTA-$107
WC (1.3%)-$254.83
Total-$6,523.14
Totals $457,318 $49,330 $131,564 $638,237
Notes - 3% annual pay raise for all employees; Total Benefits=$ 131,564; Total Annual Amount Per
Employee= $6,579. Standard Benefits:
o Paid leave: Vacation-10 days paid annual vacation (3.2%=$1,201.66 per employee). Sick-3
paid sick days (0.8%= $300.42 per employee). Personal-2 paid personal days (0.4%= $150.21
per employee). Total Paid Leave=$33,045.80
o *Percentages are taken from the Presidents salary and were found on the Bureau of Labor
Statistics website for average employer costs in our location*
o Health Insurance-80% coverage, $750 deductible, $25 co-pay; Total = $7,882.80/month
o Life Insurance- $3,600 annually ($100,000 policy value for 25 years)
o Simple IRA Retirement Plan- Up to $3000 match, $350 annual plan fee

6
 Exhibit 3: Market Segmentation Analysis/Target Market Selection
Segment
Growth
size (e.g. # Priority
Projection
Segment Name of Segment Description level for Justification for Targeting
of
Households targeting
Segment
in Segment)
We chose residents of water deficient and drought-
prone states as our priority target segment. These
Water deficient regions are those that lack
states are Arizona, California, Colorado, Kansas,
sufficient available water to meet the
Nevada, New Mexico, Oklahoma, Texas, and Utah.
demands of water usage. The southwest
Since their total population is over 93 million, it is
region of the United States has
in our best interest to make them our priority over
experienced a severe water shortage in
eco-conscious millennials. A large portion of the
U.S. Residents recent years due to a significant reduction
Southwest region of the United States has a major
of Water 93,689,000 in water supplied from the Colorado
1.26% 1 water shortage crisis, so by purchasing the
Deficient people River. Therefore, we are targeting men
SmartShower they can make a conscious effort to
Regions and women ages 18 to 70, who earn over
conserve water and save money. The people in this
$30,000 per year. The reason this age
segment will also be more inclined to purchase a
range is so broad is because we are
shower head with an EPA WaterSense label
essentially targeting anyone in these water
because it will be helping them save water for their
deficient regions who can afford our
communities as well. Using data from Growing
product.
Blue, we averaged the growth rates of each of those
states to determine our overall growth projection.
Men and women aged 20-34 who live in
We chose to target members of the millennial
the United States and have reasonably
generation because they are more environmentally
affluent incomes ranging from $40,000 to
and economically conscious than previous
$120,000. These individuals will most
generations. According to Pew Research Center, the
Eco-Conscious 24,128,000 likely be first time buyers looking to
1.03% 2 size of the millennial generation is 75.4 million
Millennials people conserve water to benefit the environment
people. The population of the next generation is
and drive down monthly water bills.
expected to grow to from 74 million people to 76
SmartShower is suitable for single and
million by 2030, which is a rate of about 1.03%,
shared homeowners who are particularly
according to the U.S. Census Bureau.
concerned with water usage rates.

7
Exhibit 4: Market Quantification
We found our market potential for years 2-5 prior to finding year 1 by using the Industry Market Research report conducted by Bizminer for the Plumbing Fixture Fitting and Trim
Manufacturing Industry in the United States. They obtained this data from a number of sources including multiple U.S Census reports. The statistics only had data for years 2-5, so we had to back
track in order to determine our
Year Mkt Potential Mkt Potential Mkt Growth Market Product Annual Unit Unit Price or Annual $
year 1 value. In 2013 (our year
(Revenue) (Customers) Projection Share Sales Weighted ASP Revenue
2), the market volume
percentage for small businesses Year 1 (Startup-2018) $1,410,818,017 25,600,000 2.70% 0.1922% SmartShower 45,206 units $59.99 $2,711,907
Year 2 $1,468,968,608 28,160,000 3.00% 0.2038% SmartShower 49,916 units $59.99 $2,994,460
was 15.80% of the total market
Year 3 $1,387,938,669 30,976,000 3.50% 0.2110% SmartShower 48,811 units $59.99 $2,928,171
potential. We multiplied this
Year 4 $1,683,669,825 34,073,600 4.00% 0.1213% SmartShower 50,708 units $59.99 $2,041,972
15.80% by the total 2013 Year 5 (2022) $1,614,025,749 37,480,960 5.00% 0.1900% SmartShower 51,113 units $59.99 $3,066,268
market volume to arrive at our
projection. We then used this same approach for each of the following years to reach our projected potential. According to the report, the market volume for the industry was $9,297,269,674 in
2013. Moving into 2014, this number grew to $9,665,311,068. In order to find the market potential for year 1, we found the total market growth rate from Fcst by Units Revenue
2013 to 2014 to be about 3.9586%. We then took this growth rate, subtracted it from 1 (1-0.039586 = 0.960414), and multiplied that approximated 96% by month ($)
our year 2 projection to give us our projected market potential for year 1. To calculate our market potential in terms of customers, we found that, according
Sept '18 3139 $188,340
to the EPA's WaterSense market penetration study, there are about 25.6 million showerheads sold each year. We used this as our first years customer
Oct 3222 $193,320
market potential. According to the WaterSense report, "approximately 10% of existing showerheads are replaced each year due to wear, remodeling or other
Nov 3312 $198,720
reasons. Therefore, we multiplied each year by 1.10 to obtain the customer market potential for the following years.
In order to obtain the market growth at the beginning of our five years, we used findings from the industry research firm IBISWorld. This credible Dec 3410 $204,600
report states that the annual growth of our industry was 2.7% from 2011 to 2016. We used this as our year 1 value. Our later growth rate was determined by Jan '18 3516 $210,960
a report done by Technavio, a world leader in "discovering market opportunities", on the showerhead market. Technavio claims that "rapid urbanization Feb 3635 $218,100
and growing awareness pertaining to energy and water conservation are the two major factors that bolster growth in this market, and that results in its Mar 3767 $226,020
modest CAGR of more than 4% by 2020." In order to find our growth rates for the following years, we realized that the rate would increase each year until Apr 3908 $234,480
it reached 4% by 2020. Using educated assumptions, paired with facts from the previously stated reports, we determined this rate would continue to May 4064 $243,840
increase modestly as water conservation becomes a more prevalent issue in the United States, especially in the Southwest region where we are Jun 4247 $254,820
headquartered. Jul 4459 $267,540
We found SmartShowers market share by dividing our projected annual revenue by that years total market potential. The Bizminer report found Aug 4704 $282,240
that 43 start-up firms in 2015 had an average annual sales figure of $4,068,121. We then found the average price of a Speakman showerhead (relative proxy TOTALS 45,383 $2,722,980
company) to be around $90. To find our average unit sales for year 1, we divided the projected revenue from the Bizminer report by the average price of a
Speakman showerhead. After using these averages, we multiplied our projected unit sales by our selling price of $59.99 to find our annual revenue for year 1. We then took the average annual sales
figures for small businesses for years 2013-2016 (our years 2-5) and divided that by the average Speakman showerhead price to find our projected unit sales. Using the same process, we multiplied
our unit projection by our unit price to find our projected revenue for the following years. Since the best indicator of future sales is past behavior, we chose to follow the average trends stated in
the Bizminer report for small firms within our industry. We found our price by comparing our showerhead to ones that function similarly. One of these products, the Hydrao Shower Head, is
priced at $99.99 but it comes with Bluetooth capability that syncs to your phone. Cheaply made showerheads with LED lights cost, on average, around $30, but do not consist of any other
features. Since our product will not be as high tech as the Hydrao, but more advanced than a regular LED showerhead, we chose a selling price of $59.99.
In order to calculate our units per month, we divided our first year of production unit sales by the 12 months in a year to get our average units per month. We then placed that average
value (3,767) in March, as that is the median month of production. From there, we used our projected market growth percentage numbers to find the other months' projections. Since we only
have 5 years of market growth percentage numbers (2.7% up to 5%), we found the average between each interval, and used those percentages to drive our units per month. For example, for
February we averaged together 3.5% and 3% because they were the percentages in the middle of our market growth, to give us 3.25%. Then, subtracting 0.0325 from 1, we were able to multiply
that value of 96.75% by the March projection, to arrive at the projected units for the previous month. We followed that same process back to our first month, and moving forward to our last
month. By multiplying the current months projection, times the growth percentage we calculated using the average between intervals in the market growth section, we arrived at each of the next
months unit sales. These numbers are credible because they follow the average trend for the U.S Housing Market during our months of production. An article on tradingeconomics.com shows a
graph of new home sales per month in the United States, which shows that from September to August, home sales rise steadily with the fastest growth being between April-July. This trend
supports our growth in unit sales since more and more homes are becoming eco-friendly.

8
Exhibit 5: Positioning/Competitive Analysis
Positioning Statement: For eco-
conscious millennials and residents of
drought-prone areas, SmartShower is the
best value product in the bathroom
appliances market. We communicate the
most relevant water usage information to
the consumer quickly and easily in order to
assist them in conserving water and saving
money on their monthly bills. There's
nothing complicated about it!
Competitive Analysis: According to the
Environmental Protection Agency,
showering accounts for nearly 17% of
water usage in an average family home.
However, countless people fail to realize
how much water they are actually wasting
when they shower. This is because of the
lack of knowledge and technology available
to them. The Shower Wow and Aqua Spa
shower heads are decorative and relatively
inexpensive but dont regulate or inform
you about water usage and have durability
issues. The SmartShower can replace old
inefficient shower heads and reduce utility
bills right away. This Water Sense Label certified shower head has an Environmental Protection
Agency cap that gives the same water pressure feeling while using less gallons of water per minute.
The SmartShower is made out of stainless steel with built in LED lights in the head displaying
different colors with the increase of water usage. As you can see in the two figures above, the
SmartShower has intriguing additional features, informative technology, and a reasonable competitive
price.
SWOT Analysis for SmartShower
Strengths Weaknesses
Cheaper compared to competitors No brand recognition
Internal Factors More informative than some competitors No customer loyalty
Environmentally friendly; sustainable
Opportunities Threats
Relatively untapped market Large competitors (Delta, Kohler)
External Factors Water conservation is a growing trend Seasonality of the market
Consumers more comfortable with Regulations/laws/limits to shower
technological advancements head appliances and flow rates

9
Exhibit 6: Marketing Mix
Product Branding
Our product is a modern and sleek looking showerhead featuring LED lights that change color depending on
the amount of water used. The LED lights around the showerhead light up green when you're efficiently
using water (0 to 9 minutes), change to orange when you're starting to go over a conservative amount of
water (9.1 to 15 minutes), and then change to flashing red when you are using an excessive amount of water
(longer than 15.1 minutes). This eco-friendly showerhead not only encourages using a safe and efficient
amount of water in the shower, but also features a water turbine to produce natural and sustainable energy for
the lights. The SmartShower will be a valued product due to its sleek design, ease of use, and effectiveness in
conserving water.
Pricing
2018 2019 2020 2021 2022
Hydrao Customer Price $99.99 $99.99 $99.99 $99.99 $99.99
Key competitor Customer Price -- -- -- -- --
Your Channel Price: -- -- --
Your Retail/Customer Price: $59.99 $59.99 $59.99 $59.99 $59.99
Our product will be sold online at our website for $59.99. This gives us an advantage over our competitor, as
their price is 65% more expensive than ours. The SmartShower is designed to appeal to those who are
environmentally conscious, as well as those who need to save water due to their economic situation or
geographic location. After solely selling online for the first five years, we plan to start marketing our product
out to retailers, such as Bed, Bath, and Beyond and Target.
Distribution/Location Strategy
Since a majority of our target market will be located in drought-prone areas, like the southwest United States,
our warehouse will be located in Phoenix, Arizona. We chose this location so that we can easily distribute our
product to customers, as a high percentage of them are expected to live in geographic locations that desire a
more conservative use of water. Our suppliers, Cixi Storm Showers and Xiamen Enjoy Sanitary Wares, are
both located in China and therefore will use waterway to San Diego and then highways from San Diego to
Phoenix to deliver materials to our warehouse. Cixi Storm Showers will supply the showerhead and Xiamen
Enjoy Sanitary Wares will supply an EPA certified shower cap to reach a total cost of $7.30 per unit.
Promotional Strategy
2018 2019 2020 2021 2022
Total IMC Budget: 135595 149723 146409 152099 153313
Advertising Expense: 67797 74861 73204 76049 76656
Sales Promo Expense: 67798 74862 73205 76050 76657
Size of Promotion Team: 2 2 2 2 2
Our promotional strategy is to use online advertisements to promote our product and website, and our
advertising plan will be focused on social media sites and word of mouth. We plan to use 5% of our expected
revenue each year on marketing; half of that will be spent on advertisements and half of that will be spent on
sales promotions. We plan to take advantage of popular social media sites, such as Facebook and Twitter, to
reach out to millennials. After evaluating trends in the housing market, the 2.5% that is spent on sales
promotions will predominantly be used during the spring and summer seasons. When the housing market is
in high demand, we will ramp up sales promotions in order to attract new home owners. This is expected to
boost our sales in drought-prone areas during our prime selling months. Our customer service representative
will be trained to handle any customer issues in the best and most respectful way possible. This will encourage
a positive representation of our company and exceptional customer reviews. Our promotional team will focus
on marketing our product and promoting it to potential future retailers. Their salaries will be approximately
$23,061 in the first year, and will receive a 3% raise for the first three years.

10
Exhibit 7: Flow Chart

11
Operations Exhibit 8: Quality
Indicate the Dimensions Why is this dimension important, given your industry & target market? Identify the Quality Step(s) on the
of Quality on which you Process Flowchart / Service
will focus. Blueprint to which this corresponds.
Performance The eco-friendly and modern features of the SmartShower are appealing to our target markets. It is important to Assembly of SmartShower
ensure that there is a consistent level of quality in our product to initially penetrate the shower head industry.
Conformance The WaterSense Plastic Shower Sprayer Socket inside of the shower dispenses less than 2.0 gallons per minute Unpackaging if EPA WaterSense Plastic
as well as having a spray force of more than 2.0 ounces. This aligns with the EPA requirements which are Shower Sprayer Socket
necessary in order to receive the WaterSense label which tells customers which products are water efficient.
Aesthetics The sleek design and modern concept of our shower head will make it more attractive to the customers in our Assembly of SmartShower
target market. The LED lights separate our product from other eco-friendly shower heads.
Special Features The LED lights powered by the flow of water and the WaterSense Plastic Shower Sprayer Socket of the Unplugging of SmartShower
shower head are distinctive characteristics which will help diversify our product from other shower heads
increasing customer satisfaction
Use the space below to describe any additional Proactive Quality Assurance Plans that are not connected to a specific activity on your Process Flowchart / Service
Blueprint.

There will be no need to implement a proactive quality assurance plan as our suppliers are reliable in both their product quality and delivery. To be as cost effective as possible we believe a
reactive inspection will be sufficient.

Describe any reactive quality assurance plans. Include a recovery plan should a customer receive poor quality goods and/or services.

Once the assembly process is complete, the final product will be inspected for any defects or damages. The inspection will include a careful visual search for major and minor deficiencies by
one of our employees. Also, to further ensure the product will work as advertised, it will be connected to a shower nozzle and tested accordingly. Although this will take a bit longer, it will
help to assure our customers that they are receiving a quality product. If the product passes the final inspection, it will be placed in our finished goods inventory or shipped to customers. If
the product is not up to quality standards it will be sent back to the assembly line with a malfunction notice for replenishing. If the product is beyond repair, it will be rejected.

If you will utilize a quality/process improvement methodology, indicate which:

NA TQM Six Sigma ISO Benchmarking

Other (specify what):

Note: You will not use all of them; only those with highest relevance.

Provide a specific explanation of how your chosen quality methodology relates to your business and how it will be applied:

Benchmarking will allow us to compare the quality and performance of our product to competitors. This will help identify customer expectations so we can achieve optimal customer
satisfaction. One method SmartShower will use to identify areas of improvement will be to bring together a team of individuals from all hierarchal levels in the organization to visit an
industry leading company to determine their processes and reasons for success. The information gathered from the visit can then be easily conveyed to the entire organization by each
individual, helping to decentralize the companys vision. Doing so will better communication and hopefully reduce the number of damaged products in work in progress procedures
increasing operational efficiency.

12
Operations Exhibit 9: Inventory, Suppliers and Distribution
RAW MATERIAL INVENTORY & SUPPLIER SELECTION
Item(s) Supplier Name & Reason for selecting this supplier Supplier Frequency of System of Mode(s) of
Location (City, State, lead time replenishment Management Transportation
Country) (in days) (in days)
Customer The product this company sells is essentially 30 7 Fixed Order Highway Rail
SmartShower Cixi Storm Showers the same technology as our SmartShower. We Interval
Co. Ltd. Waterway Air
Head are able to purchase this shower head at
Zhouxiang Town, approximately $7 per unit. The minimum
Cixi, Zhejiang, China. order is 1000 units.
EPA Water Xiamen Enjoy This product contains the necessary elements 20 7 Fixed Order Highway Rail
Sense Plastic Sanitary Wares Co., required to give our SmartShower the EPA Interval Waterway Air
Shower Sprayer Ltd. certification (WaterSense label). This means
Socket Fujian, China that it will dispense less than 2.0 gallons per
minute as well as having a spraying force
greater than 2.0 Newtons. We are able to
purchase this for approximately $0.30. The
minimum order is 1000 units.
FINISHED GOODS INVENTORY
Finished goods produced Frequency of shipping Average level of Finished goods inventory Amount of safety stock on site
(per hour) finished goods on site
At the end of Year 1 180 Daily 123 794
At the end of Year 2 180 Daily 137 84
At the end of Year 3 180 Daily 134 189
At the end of Year 4 180 Daily 139 292
At the end of Year 5 180 Daily 140 887
What is the lifespan of your finished NA The lifespan of our finished goods inventory is contingent on the regulations implemented by the EPA. Our goal is to
goods inventory? maintain our value-added feature, the WaterSense label.

How will you manage perishability of NA By having two different inspection processes in our system, we are able to keep our product up to appropriate standards so
Finished Goods Inventory? that we do not lose any products while they are in inventory, given that the EPA regulations do not change. The reactive
inspection before goods are sent out to distributors and customers will ensure optimal delivery and quality of our product
when in consumer hands.
DISTRIBUTION
Name of transportation Reason(s) for selecting this provider/carrier Frequency of Pick Up / Drop off
provider/carrier
FedEx Corporation FedEx ensures the most reliable overnight service using fleets of trucks and other Weekly
forms of transportation to get critical items (SmartShower heads) into the hands of our
customers whether they be individuals or organizations.

13
Exhibit 10: Capacity and Resources
Demand Hours of Operation Capacity Utilization
(per hour) (per hour) (%)
At Start Up Monday - Friday
16.4 units/hour 9am - 5pm 20/per hour 82%
(half hour break)
At the end of Year 1 Monday - Friday
16.4 units/hour 9am - 5pm 20/per hour 82%
(half hour break)
At the end of Year 2 Monday - Friday
18.1 units/hour 9am - 5pm 20/per hour 90%
(half hour break)
At the end of Year 3 Monday - Friday
17.7 units/hour 9am - 5pm 20/per hour 88%
(half hour break)
At the end of Year 4 Monday - Friday
18.4 units/hour 9am - 5pm 30/per hour 61.33%
(half hour break)
At the end of Year 5 Monday - Friday
18.6 units/hour 9am - 5pm 30/per hour 62%
(half hour break)
Bottleneck Brief description of Bottleneck How will you manage the bottleneck identified on your Process Map to
ensure you can appropriately serve or supply your customers?
Our bottleneck initially only occurs here because during this time we have ten line
Our bottleneck occurs at the employees. To ensure we can appropriately serve and supply our customers we have
B1 reactive inspection station. two employees working the inspection station to handle any additional demand, so
that our products are of quality, revenue is not lost, and time is not wasted. The
more efficiently we can get our shower heads inspected, the more successful we can
potentially be.
B2 Our bottlenecks occur at the Our bottlenecks occur at these points for years four and five because we will now
assembly of SmartShower, the have thirteen line employees. In our system, the most effective way for us increase
reactive inspection, the packaging our capacity is distribute the three employees between the two unpacking stations
of the SmartShower, and the and the inspection stations. This causes us to essentially have four bottlenecks,
storing of the SmartShower into because we now have four stations completing 30 units per hour. However, since
inventory. this greatly increases our capacity but does not change our demand, it will lower our
utilization rate.
Additional resources (beyond your bottleneck) must be appropriately allocated to support operations. Identify which
resources have a significant impact on your capacity at start up and describe why these are appropriate amounts of resources
to start up your organization.
Throughout the first five years we will only be employing ten employees to work on the production line which entails
unpackaging, assembling, inspecting, packaging and shipping. Because our demand isnt relatively high the first couple of
years, our employee numbers will stay smaller until we start to grow. Our employees are critical to our operations since we
rely on them, and not machines to produce our product.
Describe all/any adjustments you will make as resource requirements vary with time. Be specific regarding which key
resources will be adjusted, when and how. If you will make multiple adjustments, explain each adjustment.
Since we have reliable suppliers we will not have a decrease in raw materials, even during the seasonal changes. As demand
rises for our product, our level of inventory will need to be increased. In the long run, one key resource we will have to
adjust is increasing the number of employees working on the production line to meet the demands of our customers as well.
How will you manage seasonality? NA The spring and summer are the heaviest sales seasons, due to the
trends of the housing market. To reduce unnecessary costs
manufacturing wouldnt be as heavy during the fall and winter seasons.
Most of inventory made during the down seasons will be stored as
inventory until needed.

14
Exhibit 11A: Income Statement
SmartShower
Proforma Income Statement
For the 5 Years Ending December 31
Date Ending Date Ending Date Ending Date Ending Date Ending
2018 % 2019 % 2020 % 2021 % 2022 %

Sales Revenue $ 2,711,908 100.00% $ 2,994,461 100.00% $ 2,928,172 100.00% $ 3,041,973 100.00% $ 3,066,269 100.00%
COGS 330,004 12.17% 364,387 12.17% 356,320 12.17% 370,168 12.17% 373,125 12.17%
Gross Profit $ 2,381,904 87.83% $ 2,630,074 87.83% $ 2,571,852 87.83% $ 2,671,805 87.83% $ 2,693,144 87.83%

General and Administrative Expenses

Salaries and Wages $ 457,318 16.86% $ 471,038 15.73% $ 508,230 17.36% $ 582,283 19.14% $ 582,283 18.99%
Payroll Tax Expenses 43,385 1.60% 44,686 1.49% 46,027 1.57% 49,143 1.62% 49,143 1.60%
Employee Benefits and Retirement 131,565 4.85% 135,512 4.53% 139,558 4.77% 151,328 4.97% 151,328 4.94%
General Insurance Expense 576 0.02% 576 0.02% 576 0.02% 576 0.02% 576 0.02%
Rent Expense 101,818 3.75% 101,818 3.40% 101,818 3.48% 101,818 3.35% 101,818 3.32%
Website Expense 3,229 0.12% 3,229 0.11% 3,229 0.11% 3,229 0.11% 3,229 0.11%
Advertising and Promotion Expense 135,595 5.00% 149,723 5.00% 146,409 5.00% 152,099 5.00% 153,313 5.00%
EPA Certification Expense 550 0.02% 550 0.02% 550 0.02% 550 0.02% 550 0.02%
Office Supplies Expense 20,000 0.74% 10,000 0.33% 5,000 0.17% 5,000 0.16% 5,000 0.16%
Showerhead Shipping Expense 73,554 2.71% 79,950 2.67% 78,351 2.68% 81,549 2.68% 83,148 2.71%
EPA Cap Shipping Expense 92,644 3.42% 100,700 3.36% 98,686 3.37% 102,714 3.38% 104,728 3.42%
Ground Shipping Expense 8,280 0.31% 9,000 0.30% 8,820 0.30% 9,180 0.30% 9,360 0.31%
Consulting Expense 59,222 2.18% 59,222 1.98% 59,222 2.02% 59,222 1.95% 59,222 1.93%
Cyber Liability Insurance Expense 1,800 0.07% 1,800 0.06% 1,800 0.06% 1,800 0.06% 1,800 0.06%
Patent Expense 5,000 0.18% - 0.00% - 0.00% 400 0.01% - 0.00%
Product Liability Insurance Expense 7,051 0.26% 7,786 0.26% 7,613 0.26% 7,909 0.26% 7,973 0.26%
Total General & Administrative Expenses $ 1,141,587 42.10% $ 1,175,590 39.26% $ 1,205,889 41.18% $ 1,308,800 43.02% $ 1,313,472 42.84%

Earnings Before Interest and Taxes $ 1,240,317 45.74% $ 1,454,484 48.57% $ 1,365,963 46.65% $ 1,363,005 44.81% $ 1,379,672 45.00%

Interest Expense14 $8,633 0.32% $0 0.00% $0 0.00% $0 0.00% $0 0.00%

Earnings Before Taxes $ 1,231,684 45.42% $ 1,454,484 48.57% $ 1,365,963 46.65% $ 1,363,005 44.81% $ 1,379,672 45.00%

Income Tax Expense $85,824 3.16% $101,348 3.38% $95,180 3.25% $94,974 3.12% $96,136 3.14%

Net Income (Loss) $ 1,145,860 42.25% $ 1,353,136 45.19% $ 1,270,783 43.40% $ 1,268,030 41.68% $ 1,283,537 41.86%

Statement of Retained Earnings

Beginning Balance of Retained Earnings $ - $ 1,121,969 $ 1,720,088 $ 1,659,298 $ 1,755,549

Net Income (Loss) 1,145,860 1,353,136 1,270,783 1,268,030 1,283,537

Dividends to Stockholders (23,891) (755,017) (1,331,573) (1,171,779) (1,262,591)

Ending Retained Earnings $ 1,121,969 $ 1,720,088 $ 1,659,298 $ 1,755,549 $ 1,776,495 15

Exhibit 11B: Income Statement Notes
1. On our income statement, we do not have a depreciation expense because we do not have any equipment,
and because we are renting our facility.
2. Our EPA certification expense is an estimate, this determined by the people who test our product when
they determine whether or not it meets their standards. Our $550.00 figure comes from how much it costs
for a paint company to receive an EPA certification.
3. Our consulting expense is how much it costs for us to contract out an engineering consultant to design and
fix mistakes in our SmartShower over the course of five years. We are contracting this engineering consultant
out through an outside firm.
4. The EPA Cap shipping expense and the Smart Shower shipping expense are different because although
these products are both being shipped to San Diego, CA, they are both leaving from different ports in
China. The EPA Cap leaves from Fujian while our SmartShower leaves from Zhejiang.

16
Exhibit 12A: Balance Sheet
SmartShower
Proforma Balance Sheet
As of December 31
As of Inception Date Ending Date Ending Date Ending Date Ending Date Ending
Date % 2018 % 2019 % 2020 % 2021 % 2022 %
ASSETS

Current Assets

Cash and Cash Equivalents $ 1,100,000 100.00% $ 1,357,685 56.61% $ 1,499,142 56.63% $ 1,465,955 56.64% $ 1,522,929 56.65% $ 1,535,092 56.66%
Accounts Receivable - 0.00% 1,024,219 42.71% 1,130,932 42.72% 1,105,896 42.73% 1,148,876 42.74% 1,158,052 42.75%
Inventory - 0.00% 11,910 0.50% 13,150 0.50% 12,859 0.50% 13,359 0.50% 13,466 0.50%
Total Current Assets $ 1,100,000 100.00% $ 2,393,814 99.81% $ 2,643,225 99.85% $ 2,584,711 99.86% $ 2,685,164 99.89% $ 2,706,610 99.91%

Fixed (Long-Term) Assets

Patent - 0.00% 5,000 0.21% 4,500 0.17% 4,000 0.15% 3,500 0.13% 3,000 0.11%
Total Gross Fixed Assets $ - 0.00% $ 5,000 0.21% $ 4,500 0.17% $ 4,000 0.15% $ 3,500 0.13% $ 3,000 0.11%
Less: Amortization - 0.00% (500) -0.02% (500) -0.02% (500) -0.02% (500) -0.02% (500) -0.02%
Net Fixed Assets $ - 0.00% $ 4,500 0.19% $ 4,000 0.15% $ 3,500 0.14% $ 3,000 0.11% $ 2,500 0.09%

Total Assets $ 1,100,000 100.00% $ 2,398,314 100.00% $ 2,647,225 100.00% $ 2,588,211 100.00% $ 2,688,164 100.00% $ 2,709,110 100.00%

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities

Current Liabilities
Accounts Payable - $150,000 6.25% $50,000 1.89% $50,000 1.93% $50,000 1.86% $50,000 1.85%
Accrued Salaries - 0.00% $19,055 0.79% $19,627 0.74% $21,177 0.82% $24,261 0.90% $24,261 0.90%
Accrued Benefits - 5,482 5,647 5,817 6,306 6,306
Accrued Payroll Taxes - 0.00% 1,808 0.08% 1,863 0.07% 1,919 0.07% 2,048 0.08% 2,048 0.08%
Short Term Debt 250,000 22.73% 250,000 10.42% - 0.00% - 0.00% - 0.00% - 0.00%
Total Current Liabilities $ 250,000 22.73% $426,345 17.78% $77,137 2.91% $78,913 3.05% $82,615 3.07% $82,615 3.05%

Total Liabilities $ 250,000 22.73% $ 426,345 17.78% $ 77,137 2.91% $ 78,913 3.05% $ 82,615 3.07% $ 82,615 3.05%

STOCKHOLDER'S EQUITY

Common Stock 850,000 77.27% 850,000 35.44% 850,000 32.11% 850,000 32.84% 850,000 31.62% 850,000 31.38%
Retained Earnings - 0.00% 1,121,969 46.78% 1,720,088 64.98% 1,659,298 64.11% 1,755,549 65.31% 1,776,495 65.57%
Total Stockholders' Equity $ 850,000 77.27% $ 1,971,969 82.22% $ 2,570,088 97.09% $ 2,509,298 96.95% $ 2,605,549 96.93% $ 2,626,495 96.95%

Total Liabilities and Stockholders' Equity $ 1,100,000 100.00% $ 2,398,314 100.00% $ 2,647,225 100.00% $ 2,588,211 100.00% $ 2,688,164 100.00% $ 2,709,110 100.00%

17
Exhibit 12B: Balance Sheet Notes
1. Cash is the sum of capital brought forth by the Board of Directors (us: $150,000), $500,000 from angel
investors, friends and family contributions of $200,000 and the $250,000 short-term loan with an annual rate
of 6.5%. Each of the contributions other than the short-term note are in the form of common stock (i.e.
owners equity in the company). We plan to pay back our loan within one year based off of our cash flows
from the first year.
2. Accounts receivable is calculated by multiplying the Gross Profit from the Income Statement by about 43%.
We used this rate because we found a study that claims that the average consumer prefers to use a credit
card around 43% of the time.
3. Inventory consists of raw materials and finished goods. We will hold approximately 0.5% of our total assets
in inventory in the form of raw materials and finished goods in case of unforeseen demand. This will allow
us to meet said demand faster.
4. Intangibles consist solely of our patent expense. This will be amortized with a lifespan of 10 years.
5. Accounts payable after the first year are $150,000 because we are going to have the factory inspected,
cleaned and renovated at years end. We plan to do this for each of the years after this, but on a smaller
scale.
6. Accrued salaries increase by 3% each year to account for inflation and also to provide incentive for our
employees to continue to work for us. After the third year, we had three additional warehouse workers to
improve efficiency and meet a higher expected demand, so that accounts for the wage increase at the end of
the period.
7. Payroll taxes were calculated based on the 7.65% FICA tax paid by the employer for each employee, SUTA
of $313, and FUTA of $107. These values were based on the first $7,000 of wages for each employee and
obtained from the Arizona IRS website.
8. Common stock was calculated by adding together the capital put forth by the Board of Directors,
contributions from family and friends and the money given to us by angel investors. This value summed to
$850,000. We plan to issue dividends in our first year of operation to show that were dedicated to repaying
principal.

18
Exhibit 13A: Cash Flow Statement
SmartShower
Proforma Statement of Cash Flows
For the 5 Years Ending December 31
Date Ending Date Ending Date Ending Date Ending Date Ending
2018 2019 2020 2021 2022
Cash Flows From (For) Operations
Net Income $ 1,145,860 $ 1,353,136 $ 1,270,783 $ 1,268,030 $ 1,283,537
Changes in Current Assets
Accounts Receivable (1,024,219) (106,713) 25,036 (42,980) (9,176)
Inventory (11,910) (1,241) 291 (500) (107)

Changes in Current Liabilities

Accounts Payable $150,000 100,000 - - -
Accrued Salaries and Wages 19,055 572 1,550 3,084 -
Accrued Payroll Taxes and Benefits 1,808 55 56 129 -

Cash From (For) Operating Activities $ 280,595 $ 1,345,809 $ 1,297,716 $ 1,227,764 $ 1,274,254

Cash Flow (For) From Investing Activities

Fixed Asset Purchases (5,000) - - - -
Net Cash Flows (For) From Investing $ (5,000) $ - $ - $ - $ -

Cash Flow From (For) Financing Activities

Issuance of Common Stock $ 850,000 $ - $ - $ - $ -

Short Term Debt Borrowings 250,000 - - - -
Short Term Debt Payments - (250,000) - - -
Dividends Paid to Stockholders (23,891) (755,017) (1,331,573) (1,171,779) (1,262,591)
Cash Flows From (For) Financing $ 1,076,109 $ (1,005,017) $ (1,331,573) $ (1,171,779) $ (1,262,591)

Net Change in Cash $ 1,351,704 $ 340,792 $ (33,857) $ 55,985 $ 11,663

Beginning Cash Balance $ - $ 1,351,704 $ 1,692,495 $ 1,658,638 $ 1,714,623

Net Change in Cash $ 1,351,704 $ 340,792 $ (33,857) $ 55,985 $ 11,663

Ending Cash Balance $ 1,351,704 $ 1,692,495 $ 1,658,638 $ 1,714,623 $ 1,726,286

19
Exhibit 13B: Cash Flow Notes
1. Net income was calculated by taking our sales revenue, subtracting cost of goods sold to give us gross
profit. We then subtracted operational expenses and taxes to give us Net Income.
2. We did not have any depreciation expense as we do not own any fixed assets besides a patent.
3. Changes in current assets and current liabilities were made accordingly. Current assets increased if the
annual account change was negative and decreased if the annual account change was positive. Current
liabilities increased if the annual account change was positive and decreased if the annual account change
was negative.
4. There was an initial outflow of $5000 for the application and filing of the patent.
5. In the year ending 2018 we issued $850,000 worth of common stock for cash.
6. The short term debt borrowings and payments are recorded in their respective years. The debt borrowing is
recorded as an inflow in 2018 and the debt payment is recorded as an outflow in 2019. The interest paid on
the loan is included in net income.
7. The dividends paid to stockholders are simply outflows for each respective year
8. Ending cash is reinvested into the company to help grow our business

20
Exhibit 14: Financial Ratios and Analysis

Initial Date Ending Date Ending Date Ending Date Ending Date Ending Industry Average
Balance Sheet 2018 2019 2020 2021 2022 Ratios

Liquidity Ratios
Current Ratio 4.4 5.614733892 34.26662394 32.75393102 32.50213185 32.76172391 2.04
Quick Ratio 4.4 5.586799892 34.09614323 32.59097614 32.3404297 32.59873025 1.19
Operating Cycle - 30.35702393 30.35702293 30.35702343 30.35702379 30.35702328 51.3

Leverage Ratios
Debt/Equity 0.294117647 0.216202681 0.030013372 0.031448243 0.031707329 0.03145447 1.28
Times Interest Earned - 143.6715858 - - - - 11.54

Asset Management Ratios

Inventory Turnover - 27.70924204 27.70924105 27.70924156 27.70924191 27.7092414 8.27
Receivables Turnover - 2.647781884 2.647781873 2.647781879 2.647781883 2.647781877 8.2
Fixed Asset Turnover - 602.6462222 748.61525 836.6205714 1013.991 1226.5076 5.89

Profitability Ratios
Gross Profit Margin - 0.878313055 0.878313059 0.878313057 0.878313055 0.878313057 0.3
Operating Profit Margin - 0.457359468 0.48572486 0.466490049 0.448065989 0.449951469 0.04
Return on Assets - 1.041690975 0.564202958 0.480043441 0.489925472 0.47747714 0.07

DuPont Analysis
Net Profit Margin - 0.42252911 0.451879552 0.433985022 0.416844751 0.41859885 0.02
Total Asset Turnover - 1.130756154 1.131169993 1.131349819 1.131617501 1.131836361 3.2
Equity Multiplier 1.294117647 1.216202502 1.030013296 1.031448403 1.031707171 1.031454511 2.28
Return on Equity - 0.581074059 0.526493963 0.506429693 0.486665367 0.488688087 0.15

21
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26
Team Member Biographical Information

My name is Jack Floydd, and I am a Finance major

from Sussex, England. I graduated from Ardingly
College in 2014. I am currently a junior in the College
of Business at James Madison University as well as a
member of the varsity golf team.

My name is Tucker McCoy, and I am from Penn

Laird, Virginia. I am currently a junior studying
computer information systems at James
Madison University. I am scheduled to graduate
in the Spring of 2018.

My name is Theodore Sackos and I am from

Billerica, Massachusetts. I am currently majoring
in Business Management at James Madison
University. I am expected to graduate in the
Spring of 2018.

My name is Brianna Tarzia and I am from

Richmond, Virginia. I am currently a junior
Marketing major with a minor in Human Resource
Development at James Madison University. I am
expected to graduate in the Spring of 2018.

My name is Alexandra Vidas and I am from

Woodbridge, Virginia. I am currently a senior
Marketing major at James Madison University. I
am expecting to graduate in the Fall of 2018.

My name is Ashton Clarke and Im a junior

Marketing major at James Madison University.
Im from Vienna, VA and expect to graduate in
Spring 2018.

My name is Matthew Jurcisin and Im from

Hopewell, New Jersey. I am currently a Finance
major with a CIS minor at James Madison
University scheduled to graduate in May of
2018.

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