MPAcc 809 Business Proposal - edwards.usask.ca Painter... · Web viewMPAcc 809 Business...

LAKEWOOD ACTIVE LIVING

08

Paul Groch, Erin Scott, Robert Wang, and Danielle Wong 1

Pual Groch, Erin Scott, Robert Wang, and Danielle WongJuly 3, 2009

Masters of Professional AccountingUniversity of SaskatchewanMPAcc 809 - Entrepreneurship

MPAcc 809 Business Proposal



Table of Contents

Table of Contents......................................................................................................................................................... iList of Figures............................................................................................................................................................... ii

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

2 Business Overview............................................................................................32.1 Introduction..................................................................................................................................................32.2 Mission Statement......................................................................................................................................32.3 Goals and Objectives..................................................................................................................................3

3 Industry Overview.............................................................................................43.1 Background: senior care industry,......................................................................................................4

3.1.1 Highly fragmented market.................................................................................................................... 43.1.2 Competitive market.................................................................................................................................. 4

3.2 Important factors about the industry................................................................................................53.2.1 Age group population.............................................................................................................................. 53.2.2 Per Capita disposable Income.............................................................................................................. 53.2.3 Government legislation and regulations.........................................................................................6

4 Operations Plan.................................................................................................74.1 Incorporation............................................................................................................................................... 74.2 Site Plan.......................................................................................................................................................... 74.3 Floor Plans.....................................................................................................................................................84.4 Building Plan..............................................................................................................................................114.5 Average Day................................................................................................................................................11

4.5.1 Meals............................................................................................................................................................ 114.5.2 Maintenance and Housekeeping......................................................................................................124.5.3 Activities..................................................................................................................................................... 12

4.6 Planned Capital Budget.........................................................................................................................12

5 Human Resources Plan...................................................................................165.1 Organization Structure and Management Team........................................................................165.2 Job Descriptions........................................................................................................................................16

5.2.1 Full Time Staff.......................................................................................................................................... 165.2.2 Part Time Staff......................................................................................................................................... 18

5.3 Wages and Benefits.................................................................................................................................195.4 Training Programs...................................................................................................................................195.5 Human Resources Strategy..................................................................................................................20

6 Marketing plan.................................................................................................216.1 Competitor Analysis...............................................................................................................................226.2 The Marketing Mix (4Ps)......................................................................................................................24

6.2.1 Products and Services........................................................................................................................... 246.2.2 Price.............................................................................................................................................................. 256.2.3 Promotion.................................................................................................................................................. 256.2.4 Place............................................................................................................................................................. 26

6.3 Segmentation, Targeting, Positioning.............................................................................................266.4 Marketing Strategy..................................................................................................................................26

7 Financial Plan...................................................................................................28

Paul Groch, Erin Scott, Robert Wang, and Danielle Wong i


8 References........................................................................................................29

9 Appendix One: average and median senior income.....................................30

10 Appendix Two: median after-tax income among seniors........................31

11 Appendix Three: Sample Meal Plan...........................................................32

List of Figures

Figure 1: Lakewood Active Living Site Plan....................................................................................6

Figure 2: Lakewood Active Living - proximity to competition...............................................7

Figure 3: One Bedroom Suite.................................................................................................................8

Figure 4: Typical Studio Suite................................................................................................................9

Figure 5: Building Plan...........................................................................................................................10

Figure : Organization Chart………………………………………………………………………….……19

Figure 7: Location of Competitors....................................................................................................23

Paul Groch, Erin Scott, Robert Wang, and Danielle Wong ii


1 Executive Summary

Lakewood Active Living will be a premier retirement community in Saskatoon,

Saskatchewan, targeting highly educated affluent retirees. This target market will

have a higher income level than the average retiree, in addition to having an

aptitude for challenge and the desire for continued learning. Lakewood Active Living

believes it can fulfill this need for challenge and continued learning, by providing

enriched life experiences to seniors. This will be achieved by pursuing strategies for

innovation, creativity and long term growth in a manner that is sustainable and

secures fair returns for its stakeholders.

Effectively, we want to promote an image of an elite and prominent retirement

community that focuses on technology and learning based opportunities for its

residents, on top of providing superior retirement services. We feel that this is the

next step in the retirement industry that has not be fulfilled by our current

competitors (i.e. local and regional senior care companies, hospitals, nursing homes

and other businesses that provide home health services), as research shows that the

demographics of future residents shows a rising trend in computer and internet

usage.

Lakewood Active Living will lead the retirement industry in being the first to offer a

fully web based retirement community. This includes personal computers in every

room with internet capabilities and web-cameras. This will allow Lakewood Active

Living to attract the more technologically advanced senior by offering a service that

has yet to be offered in any Saskatoon retirement business.

Lakewood Active Living will also offer an environment that promotes continued

learning and active involvement in the community. This will be achieved by offering

our residents with the opportunity to attend information seminars, guest speakers,

computer classes, and other activities that will promote a continued learning based

environment, while stimulating and motivating our clients.



Lakewood Active Living will be located in the south east end of Saskatoon in the

community development known as Lakewood. Our retirement facility will provide

over 25,000 square feet of living space, accommodating 56 residents in 30 rooms

(one bedroom and studio styles); our average monthly fee will be $2,200.

Part of Lakewood Active Living’s success will be dependent on the active

involvement of management in running the business. Those key management

positions include an Events Manager, Front Desk Manager, Kitchen Manager, and

Maintenance Manager. Each member of Lakewood Active Living’s management

team has strong and superior experience in their respective areas, and has a desire

to see Lakewood Active Living become a success.

Lakewood is a great concept with a strong market argument to support it. After the

initial construction phase of two years, Lakewood will look to fill the rooms with

occupancy rates rising from 65% in the first year to 95% in the fourth year. This

sustainable occupancy rate will yield revenues in excess of $1.6 million per year,

and net income after tax of $200K. This will be paid out to investors in the form of

an annual dividend.

To set up the operations of Lakewood, roughly $2 million is required. This will

finance the acquisition of the land, the construction of the building, the purchase of

fixed assets, as well as cover the initial operating losses incurred before the first

year of operations. Financing will be obtained in the form of a $1.3 million bank

loan secured by the land and building as well as $0.1 million in Management

funding. That leaves a shortfall of $0.6 million, which we will obtain from external

investors in exchange for a 20% controlling interest in the Company.

Overall, the investment will yield an internal rate of return, or return to the investor

of 23.3%.



Business Overview

1.1 Introduction

Lakewood Active Living will be a premier retirement community in Saskatoon,

Saskatchewan. At Lakewood Active Living, we want to promote an image of an elite

and prominent retirement community that focuses on technology and learning

based opportunities for its residents, on top of providing superior retirement

services. Our two main areas of focus are:

Providing a fully interactive environment through the use of technology.

Providing an environment that promotes continued learning and active

involvement in the community.

1.2 Mission Statement

Lakewood Active Living exists to provide enriched life experiences to seniors by

pursuing strategies for innovation, creativity and long term growth in a manner that

is sustainable and secures fair returns for investors.

1.3 Goals and Objectives

Lakewood Active Living is dedicated to creating and sustaining a superior

retirement residence that enriches the quality of life for seniors who want, and

deserve more.



2 Industry Overview

The following industry overview will set the stage for which Lakewood Active Living

will be operating in, as well as a basis for a SWOT analysis.

2.1 Background: senior care industry1,2

2.1.1 Highly fragmented market

The senior care industry is highly fragmented due to few barriers to entry and an

increasing market demand. Within the Saskatoon area, there are more than one

hundred small and similar service providers. At Lakewood Active Living, we will

compete with local and regional senior care companies, hospitals, nursing homes

and other businesses that provide home health services. In addition, there are

relatively few barriers to entry in the senior care services markets in which we

operate. Our primary competition comes from local privately owned and hospital-

owned health care providers. We compete based on the active lifestyle that we

provide to our clients; in addition to the quality, expertise and value of our services.

Lakewood Active Living will offer a continuing learning program: we will invite

professors from the University of Saskatchewan and other community colleges to

teach classes, and give seminars on different interesting topics. Furthermore,

Lakewood Active Living will provide transportation services to our residents,

schedule local transportation to various shopping excursions and appointments,

organize outdoor activities, such as berry picking, and to go on tours of the Zoo. Our

goal is to offer an active, healthy, joyful living environment for our residents.

2.1.2 Competitive market

In Saskatoon, there are more than one hundred different retirement businesses that

make up our competition. Due to the nature of the industry, every retirement

community, no matter the location, is considered to be competition. Based on

Canada Mortgage and Housing Corporation’s 2009 Senior Housing Report,

1 Canada Mortgage and Housing Corporation’s 2009 Senior Housing Report2 Statistics Canada, A Portrait of Senior in Canada



Saskatoon’s average rental price for one bedroom is around $2,000 per month. We

randomly selected 15 competitors and compared their prices, services, locations,

and room availability (Appendix X1). As a summary, the competitors’ prices range

from $1,000 to $2,600 based on the room and service provided; services provided

vary from standard care (accommodation, foods, cleaning) to heavy care (catheter,

diabetic care, registered nursing, 24 hour call); rooms are available from five to

twenty two rooms. Lakewood Active Living will have 30 rooms and is able to

accommodate 56 residents; our average monthly fee will be $2,200.

2.2 Important factors about the industry

2.2.1 Age group population

At the start of this new century, Canada faces significant aging of its population as

the proportion of seniors is increasing more rapidly than all other age groups. In

2001, one Canadian in eight was aged 65 years or over. By 2026, one Canadian in

five will have reached age 65. At end of 2009, 12% of Saskatoon’s total population

(estimated at 234,000) is above age 65, which means that there will be more than

28,000 seniors living in Saskatoon. Furthermore, per Statistics Canada, the aging

population trend will continue further; by the end of 2030, 24.9% of the total

Saskatchewan population will be above the age of 65.

2.2.2 Per Capita disposable Income

Today’s seniors are richer than ever; the financial situation of seniors in Canada

improved significantly over the last 25 years. Between 1980 and 2003, the average

total before-tax income received by senior couples increased from $39,800 to

$49,300, an increase of 24%. Their average total after-tax income increased by 18%,

rising from $36,300 to $42,800. Senior couples at the mid-point of the income

distribution, median after-tax income increased from $27,900 to $36,500, an

increase of $8,600 or 31% (Saskatchewan: $26,500 to 35,600, an increase of 9,100

or 34%). (See Appendix 1 and 2).



2.2.3 Government legislation and regulations

The senior care industry is subject to extensive government regulation. Any changes

to the laws and regulations governing our business, or the interpretation and

enforcement of those laws or regulations, will cause us to modify our operations and

could negatively impact our results of operations. The laws and regulations

governing our operations regulate how we do business, the services we offer and

impose certain requirements on us relating to:

licensure and certification;

adequacy and quality of health care services;

qualifications of health care and support personnel;

quality of medical equipment;

confidentiality, maintenance and security issues associated with medical

records and claims processing;

operating policies and procedures; and

addition of facilities and services

These laws and regulations, and their interpretations, are subject to frequent

change. Changes in existing laws and regulations, or their interpretations, or the

enactment of new laws or regulations could reduce our profitability by:

increasing our liability;

increasing our administrative and other costs;

increasing or decreasing mandated services; and

forcing us to restructure our relationships with referral sources and

providers.



3 Operations Plan

3.1 Incorporation

We plan to incorporate Lakewood Active Living due to the following reasons:

1) To ensure that we have limited liability and to receive lower rates for liability

insurance.

2) To allow us to raise funds since lenders and equity investors look favorably

on incorporated companies.

3) To ensure that the business will survive even if the initial owners die or want

to move on.

3.2 Site Plan

Lakewood Active Living will be located in the south east end of Saskatoon in the

community development known as Lakewood, as seen in Figure 1.

Figure 1: Lakewood Active Living Site Plan



The building will be located on 1 acre of land and will back onto a green space and

nature trial surrounding a pond. Within the community, it will have commercial

shops for residents to walk to as well as numerous green space areas. This residence

will also be situated within one kilometer of Boychuk Drive, which then has easy

access to Taylor Street which is a main thoroughfare in Saskatoon.

As seen in Figure 2, it is the only residence of its kind within a five kilometer radius.

Figure 2: Lakewood Active Living - proximity to competition

The majority of senior residences are located near downtown Saskatoon. This

provides potential residents with the option of a quieter, peaceful setting, yet still

with access to stores, doctor offices and other community members.

3.3 Floor Plans

The Lakewood residence will have two room styles available for residents. Based on

research found in the CMCH Seniors report (2009), the highest vacancy rate for

senior’s residences in Saskatoon are in the bachelor and one bedroom range at

2.7%. Therefore, the majority of rooms within this floor plan are one bedroom

(Figure 3) with a small amount of studio suites (See Figure 4).



Figure 3: One Bedroom Suite



Figure 4: Typical Studio Suite

Though rooms will be furnished by Lakewood, residents will be encouraged to bring

their own decorations in order to keep the environment comfortable, familiar and

personal. Everyone will have meals included in their rental payment, but each room

is provided with a sink and small refrigerator to allow for independence.



3.4 Building Plan

The building will have a layout of 2 floors each with 15 rooms. We believe that

having a small but familiar clientele will allow residents to get to know each other

easier.

Figure 5: Building Plan

3.5 Average Day

3.5.1 Meals

The following will be the meal scheduled followed at Lakewood Active Learning:

8:00 am to 9:30 am – Breakfast will be served

12 pm to 1 pm – Lunch served

5 pm to 7 pm – Dinner served

The Chef and staff will arrive in the kitchen at 6am to begin preparation food for the

upcoming day. The Chef will be required to be present for the entire day and will

have the freedom of devising a menu upon approval of Lakewood management.

Residents will be encouraged to share their ideas about what they would like to see



on the menu as well as provide recipes to the Chef. Please see Appendix Three for a

sample meal plan.

3.5.2 Maintenance and Housekeeping

Housekeeping will be done between 10 am and 2 pm once a week per room. Each

resident will be informed what day their rooms will be cleaned.

3.5.3 Activities

For the elderly, social pastimes can play a critical role in preserving their physical

and mental health. In fact, a new study suggests that the less time older people

spend engaged in social activity, the faster their motor function tends to decline.

Therefore, each day of the week Lakewood Active Living will provide an assortment

of activities. These activities will have to focus on the three criteria stated in out

mission statement – Health and fitness, well-being and lifelong learning. Therefore,

each week has to have at minimum two activities that cover each category. A listing

of activities as well as an example week schedule is provided.

Monday Tuesday Wednesday Thursday Friday Saturday Sunday

Morning

10 am

Yoga Wii

Games

Sit and be fit Yoga Choir

Practice

Morning

Trip to

Farmer’s

Market

Afternoon

2 pm

Bridge Volunteer

at

Universit

y

Guest

Speaker – U

of S

Tutorial

Improve

compute

r skills

Tai Chi

3.6 Planned Capital Budget

Revenues: We will create revenues through the sale of services and the rental of

rooms within the community. Per individual room, our assisted living program,

including rent, food, and activities, will average $2200 per month.



Building: The Lakewood building will provide over 25,000 square feet of living

space within a single structure. There will be enough rooms for approximately 56

members, each receiving over 700 square feet of personal living space. The lodge

will have a large, cozy sitting room, a restaurant seating 60 people, a studio with a

raised platform at the front which will provide a venue for yoga and workout classes

as well as guest lectures, a games room and a small ‘private’ room that will be

reserved for meetings or more private dining in case family members come to visit.

Also, the offices for the management team will be located within the lodge.

Furniture: Furniture will be purchased for each of the units and will be replaced as

needed throughout the tenant’s stay. We will also provide each member with a top-

quality computer that will be synchronized with an efficient network that will

enable members to perform research, interact with friends and keep in touch with

daily events. This is in response to the increase in internet usage among seniors.

Rising from 12 percent in 2000 to 37 percent in 2008, we would like to take

advantage of this trend. We will also provide the following furnished areas: kitchen,

dining area, studio, common area and games room.

Also, we will require a large vehicle to transport members when we take them on

excursions outside the community. If there are excursions that require additional

transportation, a bus will be rented using the additional activities fund.

Food Expenses: We will have a strong emphasis on the quality of the food served

at our lodge. Breakfast and lunch will be provided through a buffet format so that

each individual can pick and choose what they prefer. For dinner, this will normally

be served. A budget of $20 per person per day on just the raw materials of food, not

including wages etc., will ensure that we are able to provide the finest quality meals

for all members. We will keep an inventory of approximately $2,000 worth of food

materials at all times, and the restaurant will be open from 6am until 9pm, or longer

for special events. This will allow the cooks to prepare the food for the upcoming



day as well as have time to clean up. Residents will have access to the dining room

from 7:30 am until 9 pm.

Housekeeping: Lakewood Active Living will employ two full-time employees who

will be responsible for all janitorial and housekeeping duties. It was determined that

full-time employees would be preferred over a contract service due to the

unexpected nature of this type of work. Each housekeeper will be responsible for 15

rooms and will be given approximately 1 ½ hours to clean each. This will include

daily clean-up in the lodge, weekly housekeeping and linen-services for members,

and some outside clean-up if required.

Additional Activities: We will set up guest lectures, excursions to restaurants and

other places of interest, and other similar additional activities and entertainment

events. These will be regulated by a relatively flexible budget of approximately

$3,000 per year per member.

We will form a partnership with the University of Saskatchewan to provide lectures

from various professors on such topics such as health, politics and business. We will

also have guest speakers from the community, such as an art class by Gail Adams

School of Art or a motivational speaker selected from the roster provided by MCP

Speakers.

Miscellaneous: Insurance, outdoor and general building maintenance, and the

supply of utilities will all be provided on a contract basis through reputable outside

sources.

Insurance: Insurance will be purchased for: Liability, theft, fire, commercial auto,

contents in building, business interruption, crime, money/securities, office

equipment, commercial general, errors and admissions, non owners automobile,

bonding employees. Cherry Insurance Company of Saskatoon has provided a quote

for these services for $7,500.



Developer: We have chosen Dundee Developments to contract and build the

Lakewood Active Living Residence. Dundee is a well-known residential land

developer in Western Canada and brings with them extensive local market

knowledge and experience. Along with construction, Dundee provides land

development operations involving the assembly of raw land parcels, preparation of

planning and engineering designs, securing of necessary municipal approvals,

installation of the development infrastructure (such as roads, sewers and parks) and

implementing architectural controls. The costs associated with Dundee’s services

are included in the cost of the building.

Refer to the Financial Plan for detailed breakdown of capital expenses.



4 Human Resources Plan

4.1 Organization Structure and Management Team

Lakewood Active Living will operate under the following organizational structure:

Part of Lakewood Active Living’s success will be dependent on the active

involvement of management in running the business. Therefore, management will

consist of a customer relations manager, front desk manager, kitchen manager, and

maintenance manager. These four key positions will sit on the board of directors, in

addition any potential investors who may wish to be a member of the Board. If this

is the case, a majority vote will be required to introduce new board members. The

Board will meet once a week, and all members must be in attendance.

4.2 Job Descriptions

It is important for each staff member of Lakewood Active Living to fulfill its specific

job descriptions and duties.

4.2.1 Full Time Staff

Full time staff will include those with management responsibilities as follows:

Events Manager – Danielle Wong

Danielle has extensive events planning experience, organizing many university

functions, and has previous work experience at a retirement home. She holds a


Figure 6: Organization Chart


BComm in accounting and a BA in political science. With her educational

background, she has the ability to organize and build the appropriate relationships

to fulfill Lakewood Active Living’s goal for pursuing strategies for innovation,

creativity and long term growth in a manner that is sustainable. Her responsibilities

include:

Organizing guest lectures, excursions, and activities

Responsible for building and maintaining a relationship with the University

of Saskatchewan and other facilities to coordinate lectures

Ensure overall client satisfaction by addressing any concerns that residents

may have

Promote and create awareness of Lakewood Active Living

Front Desk Manager: Erin Scott

Erin has great organizational skills that she has developed as a previous Nurse and

Accountant. Her background will be a key success factor in this position, as she will

be dealing closely with residents and potential residents. Her knowledge of the

medical arena will be a good demonstration of Lakewood Active Living’s

commitment to providing enriched life experiences to seniors by pursuing

strategies for innovation, creativity and long term growth in a manner that is

sustainable and secures fair returns for investors. As the front desk manager, her

responsibilities include:

Oversee front desk staff scheduling

Deal closely with clients and potential clients

Resolve any problems that might have occurred the previous day

Oversee logistical tasks

Managing the company’s financial operations



Kitchen Manager: Robert Wang

Robert has a passion for cooking delicious and healthy meals. His attention to detail,

and ability to work in teams are great characteristics that will be key to managing

Lakewood Active Living’s kitchen. Responsibilities include:

Order supplies if needed

Review days inventory

Hire and supervise serving and cooking staff

Update and maintain dining schedule

Maintenance Supervisor: Paul Groch

Paul is a handy man and technical whiz. His background will help ensure Lakewood

Active Living provides an image of an elite and prominent retirement community

that focuses on technology and learning based opportunities for its residents.

Order supplies if needed

Review days inventory

Hire and supervise maintenance staff

Update and maintain cleaning schedule

Provide IT support to residents

4.2.2 Part Time Staff

Part-time employees include front desk staff, cooks, servers, laundry staff,

housekeeping staff, and maintenance/janitorial staff. These positions will require

shift work with a lot of flexibility to accommodate the needs of the employees. Their

responsibilities will include:

Specific job related tasks

Excellent customer service skills

Excellent communication and team work skills

4.3 Wages and Benefits

Management will begin to receive salaries after the construction phase, starting in

2010, with an annual salary of $40,000 and benefits. Part time staff will receive an

hourly wage of $15 / hour and no benefits.



The cost break down and human resources needs is as follows:

Table 1: Human Resource Needs

Number FT / PT Hours / week

Salary /

Wage Benefits^

Annual Total

Cost

Management Team* 4 FT 40 $40,000 $7,500 $176,000

Front Desk Staff 3 PT 20 $15 $0 $46,800

Cooks 2 PT 20 $15 $0 $31,200

Servers 5 PT 8 $15 $0 $31,200

Housekeeping Staff 3 PT 40 $15 $0 $93,600

Maintenance / Janitorial Staff 1 PT 20 $15 $0 $15,600

Total 18 $394,400

* Management team consists of the Events Manager, Front Desk Manager, Kitchen

Manager, and the Maintenance Manager.

^ Benefits are estimated to be 10% of salary.

` Servers are expected to have 3 shifts per week. Each shift is 4 hours long. There

are 5 servers per shift, and 3 shifts per day.

“ The number of part time staff will vary depending on the number of residents at

LAKEWOOD ACTIVE LIVING. Table 1 assumes full capacity.

4.4 Training Programs

Initial training for all staff members will be provided by the management team, in

addition to having a day to job shadow a more experienced staff. Managers will have

already had experience in their respective areas, and therefore, training will not be

provided. However, an orientation will be provided to all employees by a respective

senior staff member.

4.5 Human Resources Strategy

Lakewood Active Living prides itself in attracting top quality individuals who have a

strong work ethic, exceptional communication skills, and most importantly, superb



customer service skills. To retain and motivate employees, monthly recognition will

be provided, on top of annual staff appreciation parties. In order to secure honest

and loyal staff at Lakewood Active Living, we will promote an internal marketing

effort towards our staff. Not only do we want to ensure our residents are

comfortable and enjoying their experience at Lakewood Active Living, but also want

our staff to be content in what they are doing. We plan on doing this by offering

competitive wages. Also, we plan to hold weekly meetings for all our employees.

This will allow each employee to have a voice in our company and feel like a part of

the Lakewood Active Living family.



5 Marketing plan

The retirement living sector within Saskatoon, and Canada in general, is a highly

competitive industry. Seniors have a plethora of retirement living options when

they decide to move onto this chosen path. This is particularly the case in Saskatoon,

as many retirement living businesses offer similar services and products. However,

we believe that Lakewood Active Living will be able to differentiate itself from its

competitors by establishing an interactive forward-looking living environment in

the following ways:

Lakewood Active Living will offer a fully interactive environment through the use of

technology.

Lakewood Active Living will lead the retirement industry in being the first to offer a

fully web based retirement community. This includes personal computers in every

room with internet capabilities and web-cameras. This will allow Lakewood Active

Living to attract the more technologically advanced senior by offering a service that

has yet to be offered in any Saskatoon retirement business.

Lakewood Active Living will offer an environment that promotes continued learning

and active involvement in the community.

At Lakewood Active Living, we are going to offer an intangible benefit to our

residents in the form of continued active involvement. What this means to our

clients is that at Lakewood Active Living, “life does not end.” Society has stereotyped

retirement communities as a nice big apartment type building where mindless

individuals sit around playing chess all day, while talking about the weather. Well

this is not what our target market wants out of their so-called “golden years.” Our

clients are motivated individuals, who want to learn and be involved in what is

happening in society. Thus we are offering them that opportunity at Lakewood

Active Living by allowing our residents to attend information seminars, guest

speakers, and computer classes. We want to promote a continued learning based

environment that will stimulate and motivate our clients.



Overall, we feel that the current retirement industry and those retirement

businesses in Saskatoon are not adapting to current trends, by accommodating the

demographics of future residents. Research shows that there is a rising trend in

computer and internet usage in the future retirement population. We believe that

Lakewood Active Living can capitalize on this statistic and shortage that has been

created by other businesses in this industry. Lakewood Active Living will also create

an entirely new attitude towards retirement living – an attitude that promotes and

opens the possibilities for the use of technology and continued learning.

5.1 Competitor Analysis

The following chart provides a competitor analysis, indicating who our competitors

are, where they are (see Figure 4) and what their marketing strategies are:

Table 1: Competitor Analysis3,4

Competitor Services Offered PriceRooms

Available Smoking phone

1Ashton Valley Personal Care Home

regular care, House doctor makes call

$1,350 to $1,500 per

month

for 10 people

No smoking (306) 382-8975

1aAmy McClure House

regular care -for 23 people

No smoking (306) 955-7677

2Balicanta Personal Care Home

Catheter, Diabetic care, regular care

$1,200 - $1,500

for 12 people

No smoking (306) 934-5903

3 Quality Care Home regular $2,075 for 10 people

No smoking (306) 651-0231

4Abby Pro Personal Care Home

Diabetic care, Alzheimer care, and regular care

$1,600 per month and

residents pay for their own medications

Rooms for 14 people

to liveNo smoking (306) 242-7904

5 GNE Care HomeCatheter, Diabetic care, regular care

$1000 - $1300

for 12 people

No smoking (306) 382-4944

3 Senior Home Competitors in Saskatoon: http://www.weblocal.ca/map/?lat=52.129266999999999&limit=20&long=-106.670253&place=Saskatoon%2C%20SK&q=nursing%20home#senior%20home|||Saskatoon%2C%20SK|||||||||14 Retirement Homes in Saskatoon: http://www.weblocal.ca/map/?lat=52.129266999999999&limit=20&long=-106.670253&place=Saskatoon%2C%20SK&q=nursing%20home#retirement%20home|||Saskatoon%2C%20SK|||||||||1



Competitor Services Offered PriceRooms

Available Smoking phone

6The Palisades Intermediate Care Home

Support services are provided under contract by LutherCare Communities

- 22 rooms No smoking (306) 653-3998

7Greystone Personal Care Home

regular care$1600 per

month

for 5 people (female

only)

No smoking (306) 955-0253

8Arbor Villa Care Home

regular care -

for 13 people (female

only)

No smoking (306) 249-3317

9Luther Intermediate Care Home

Participation in activities with other LutherCare Communities buildings

$2,600 per month

for 15 people

No smoking (306) 664-0390

10M&M Private Care Home

Diabetic care, and regular care

$1200-$1600/month

for 12 people

Smoking is allowed out

of doors(306) 242-6501

11Maria's Personal Care Home

Dementia care, regular, Philippine spoken

$1500.00 per month

for 8 people

No smoking (306) 249-0937

12311 Silverwood Care Home

Diabetic care and regular care, house doctor

$1,000 5 rooms No smoking (306) 384-3315

13A Ray of Sunshine Care Home

Staff speak English and Tagalog

$1875/monthfor 10 people

Smoking is allowed out

of doors(306) 652-2118

14Villa Royale Perosnal Care Home

regular - - - (306) 978-3098



Figure 7: Location of Competitors

Based on our competitor analysis, we feel that Lakewood Active Living can provide

something that our competitors cannot – an enriched life experience to seniors by

pursuing strategies for innovation, creativity and long term growth in a manner that

is sustainable and secures fair returns for investors.

5.2 The Marketing Mix (4Ps)

5.2.1 Products and ServicesLakewood Active Living will offer a number of services common in retirement

businesses that range from dining room services to laundry services. What will

differentiate Lakewood Active Living as mentioned before is the technology based

and interactive living environment. These two aspects of Lakewood Active Living

are very important as these services will set it apart from its competition. As



mentioned above, we will have staff devoted to making Lakewood Active Living an

interactive hub for our clients, which will allow them to explore many educational

and informative sessions. Guest speakers will be brought in, and constant

information will be provided to our residents about community events, seminars,

travel possibilities, and numerous other activities and events. By offering these

services, we want to emphasize the ability for our residents to experience a fulfilling

and mind stimulating stay at Lakewood Active Living.

5.2.2 PriceLakewood Active Living is a superior and exclusive retirement living campus

directed to educationally affluent individuals. As such, Lakewood Active Living is

priced competitively with other upper end retirement businesses within the city

and our prices will average around $2,200 / month, depending on the service plan

that our client desires. Even though our prices will be on the higher end, it will not

affect our demand as we feel our clients will not be looking at just the price, but

rather the intangible benefits that accompany our services.

5.2.3 PromotionLakewood Active Living will provide an image of a retirement community where

individuals can take part in a technology based, interactive learning environment -

an environment where retirees can continue to be stimulated and grow as

individuals. We want to focus on the mental and emotional aspects of our clients,

not simply the aesthetics of a retirement community. The promotion of Lakewood

Active Living will be through a few different mediums. We want people to know

about our competencies and intangible benefits of Lakewood Active Living, and we

feel the best way to promote this message is through personal selling. Specifically,

we feel that our management team can play a major role in this, as our target market

can be found within our network of contacts. We will also promote Lakewood Active

Living through mediums such as flyers and brochures. These promotional items will

be mailed out to potential clients and will also be distributed to companies who

have employees that meet our target market. Also, we want to involve real estate

agents and formally educate them on the benefits of Lakewood Active Living. This



way, these real estate agents will have the necessary knowledge to inform its clients

of Lakewood Active Living’s benefits. Additionally, Lakewood Active Living will also

target its promotional activities towards the family and relatives of potential clients,

to inform them about the benefits of our facility to our clients and to them.

5.2.4 PlaceAs noted throughout this plan and within the operations section, Lakewood Active

Living will be situated in the south east end of Saskatoon in the community

development known as Lakewood. Lakewood Active Living will be targeted towards

highly educated affluent individuals who will be targeted through the networks of

those on the management team (word of mouth), promotional activities, and

advertising.

5.3 Segmentation, Targeting, PositioningLakewood Active Living will focus on the highly educated affluent retirees in

Saskatoon. These individuals will normally be university-educated individuals who

have had successful careers in their life. Lakewood Active Living will target those

individuals entering the retirement stage of their life (~mid 50s) who still have an

aptitude for challenge and the desire to continue learning. As these individuals will

have typically have led prominent careers, we want to focus on those who are

familiar and desire to continue the use of technology in their life. We want to

provide an image of an elite and prominent retirement community that focuses on

technology and learning based opportunities for its residents.

5.4 Marketing StrategyAt Lakewood Active Living, we want to promote an image of an elite and prominent

retirement community that focuses on technology and learning based opportunities

for its residents. We want to achieve this by targeting our potential clients and

providing them with as many opportunities to get to know the benefits of Lakewood

Active Living. This will be achieved by providing a tour of the facility, showing the

potential resident all of the services we offer and the benefits associated with them.

Potential residents will also have the opportunity to talk to other residents to find

out first hand what the Lakewood Active Living experience is all about.



Lakewood Active Living will also target its marketing strategy to the most important

people surrounding the client – their family and friends. We feel that everyone

should be a part of the retirement process. Thus we also will stress the benefits that

Lakewood Active Living has to offer to the whole family. These include making visits

easier and more fun by having guest suites for the resident’s families, and offering

activities that visitors can enjoy alongside our client. It is essential that we stress to

all parties involved that the decision to move into Lakewood Active Living is

beneficial to everyone.

Overall, we feel that our marketing strategy will demonstrate the true benefits of

Lakewood Active Living. At Lakewood Active Living, our clients will be able to find a

place where they can enjoy retirement in a social and mind-stimulating

environment. Not only will Lakewood Active Living provide all the aesthetics that

any other retirement community would provide, but Lakewood Active Living will

also provide an environment that will fulfill the mental and emotional aspects that

our residents need. Specifically, the technology based environment, and continued

learning aspect will fulfill this need, allowing our residents to challenge themselves

and grow as independent individuals. The option of learning will allow residents to

explore new frontiers that they may not have had the time for earlier in their lives.

Moreover, our customer relations’ director will also focus on organizing additional

activities that will fulfill this need of our residents. Activities such as helping out in

food drives, or providing mentorship to troubled teens will fulfill this need.

Also, with our focus on a technology friendly environment, Lakewood Active Living

will provide the opportunity for increased communication with family – particularly

for those residents that have children and grandchildren. The new generation of

society is technology oriented, and communication has shifted heavily towards the

use of email and instant messaging. Accordingly, our residents will have 24-hour

access to the Internet, where they can e-mail loved ones, or even take part in online

web cam conversations.



6 Financial Plan

The financial plan includes a seven year projection, which includes a two year construction period, of income statement, retained earnings, balance sheet, and cash flow. The financial statements have been displayed in appendix’s two, three, four, and five. The estimates, as summarized in appendix one, have been derived from the following:

Revenue estimates from the marketing plan.

Operating expenses and capital budget from the operations plan.

Wages and salaries from the human resources plan.

Economic Forecast:

The growth in the rental price has been assumed to be the same as inflation, which as displayed in appendix one is set at a rate of 3% per year. The economic forecast is also based on the completion of the construction of the facility by the end of 2010 with residents being able to move in at the start of 2011. Due to our advertising during 2009 and 2010, the continued aging population, and low vacancy rates for retirement communities in Saskatoon, we have forecasted our occupancy rates an average of 65% in 2011, 80% in 2012, and 95% in 2013. Given the current levels of vacancy rates, we believe that 95% occupancy will be reflective of our future operations.

Working Capital Estimates:

Accounts Receivable

At Lakewood Active Living, we will obtain direct withdrawal information from our residents. During the application process, this information will be collected from the potential resident and confirmed with the related bank, prior to the resident being accepted to Lakewood. The payment for the residence will be at the start of each month and we will extend credit terms of net 30 days. For overdue accounts, we will follow up with the resident and try to work out an arrangement that does not result in an eviction. However, in the unfortunate circumstance and as a last resort, we will evict the resident from the residence.



Financing Budget:

To finance the business, we are looking to secure $600,000 in investor funds to go along with $100,000 in Management funds and a $1.3 million bank loan. The investor funds will be used in the first year to purchase the land and begin construction of the building. The $1.3 million bank loan will be drawn on during the second year of operations and used to pay the remaining cost of construction as well as purchase the equipment and capital assets required to operate the business. The following table summarizes the financing plan:

Breakdown of Total Financing Required

The following table outlays the total financing required.

Investor Financing

Under the financing plan, the investor would receive Class B common shares with a total of a 20% controlling interest in the Company. Management would receive Class A common shares with an 80% controlling interest in the Company.



Dividend Policy:

Although there is adequate cash on hand to pay dividends in the first year of operations, the business will distribute dividends when retained earnings are in a positive position. This will allow the Company to pay down debt before issuing dividends. Any balance that exceeds positive retained earnings will distribute dividends up to $200,000 per year. The business will start distributing dividend in the fourth year of operations being 2014 where $150,000 in dividends will be paid out. The annual maximum of $200,000 will be paid out on each subsequent year. Dividends will be distributed based on the controlling interest in the organization.

Bank Loan:

Currently the PRIME rate is set at 5% and we have set our borrowing rate at fixed rate of PRIME plus 1%, being 6%. To finance the purchase of the land, the construction of the building, purchase of equipment, and to fund initial operating shortfalls, we will be borrowing $1.3 million. The debt would ordinarily be amortized over a twenty year period; however, due to the strong cash flows generated in the initial years of operations, we have elected to pay down the debt principal balance on a faster than required basis. Please refer to appendix eight for a copy of the debt amortization schedule. Under the current model, we forecast that the debt will be repaid after ten years.

Corporate Income Taxes

In order to be eligible for the small business deduction, our business needs to be a Canadian Controller Corporation and the business needs to have active business income. Under our forecast, the majority of the Company is controlled by Canadian’s residents. Therefore, we are forecasting taxes based on the small business deduction rate of 16%. Any amount in excess of the $500,000 threshold would be taxed at the 30% threshold.

Ratio Analysis:

As outlined in appendix nine, we have calculated the key profitability ratios, solvency ratios, and investment utilization ratios. The key highlights, once the business is established and past the start up phase are:

Sustainable gross margin of 22.6% per year

Return on assets of 8.5% to 12%

A return on equity of 23% to 28.5%



The debt to equity ratio decreases at a strong rate as due to the strong cash flows generated from operations and debt repayment plan. Along with the decrease debt to equity ratio is an increased interest coverage, implying that our Company will be able to meet loan repayment requirements.

Management Information System:

Throughout the course of the year, Management will meet frequently to review the operations of the Company and assess if budgets and policies are being adhered to. This will allow us to follow up on past due accounts, maximize occupancy rates, compare costs and revenues to budgets and deal with resident concerns.

On a monthly basis, Management will meet to address the following:

Accounts receivable balances exceeding 30 days.

Changes in occupancy rates

Resident concerns

Monthly financial statements vs. budgets

On a quarterly basis and annual basis, the following information will be submitted to the Bank and to investors:

Quarterly / Annual financial statements

Summary of operations for the quarter including occupancy rates, market trends



Financial Analysis:

Based on the net present value calculation performed as per appendix ten, the Company will generate positive cash flows in its first year of post construction operations with annual cash flows in excess of $300,000 once occupancy reaches 95%. In the first two years, due to the acquisition of land, construction and start-up costs, the Company will incur a total of $2 million in negative cash flows.

Based on the above mentioned cash flows, the net present value of the investment opportunity was calculated using the weighted average cost of capital approach. In this scenario, we’ve assumed that the optimal debt to equity structure is $1.3 million in debt and $0.7 million in equity financing. Due to the collateral available in the form of the land and building, it will be likely to attain such a structure. As calculated in appendix ten, the weighted average cost of capital is 10.3%, assuming a desired return on equity of 20%. Considering this as a moderately risky business, the required rate of return has been taken as 20%. Overall, the investment will yield an internal rate of return of 23.3%.

Risk Analysis:

For analysing the risk of this business, some critical factors have been identified, which can either boost or adversely affect the business. The following are these critical factors.

Occupancy rates

Interest rate

To mitigate the risk of low occupancy rates in the first years of operations, we will be undertaking a marketing strategy during the constructions phase as suggested in the marketing plan. As for the interest rate, we are looking to lock in a fixed rate of 6% since rates are currently historically low. Furthermore, we are looking to repay the debt as soon as possible to maximize the potential returns to the investor.



Scenario Analysis:

We have performed a scenario analysis based on the base case, best case, and worst case scenarios by varying the key revenue and cost drivers. The results are shown in appendix eleven. Under the worst case, the internal rate of return drops to negative 0.7%. In the best case, the internal rate of return of 38.7%.

Breakeven Analysis:

To calculate the breakeven point, we focused our calculation on the key revenue driver, being occupancy rates. Under the break even analysis, the Company would need to maintain an occupancy rate of 75%. Any occupancy level below this would result in a negative NPV. At 75%, the internal rate of return is calculated as 11%.



7 References

Canada Mortgage and Housing Corporation’s 2009 Senior Housing Report

Statistics Canada, A Portrait of Senior in Canada

Statistics Canada, Survey of Consumer Finances; Survey of Labour and Income Dynamics.



8 Appendix One: average and median senior income



9 Appendix Two: median after-tax income among seniors



10 Appendix Three: Sample Meal Plan


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