Industry-specific Software Business Plan

Insurance Solutions LLC (ISL) will become the premier provider of Web-based property and contents valuation software to consumers, insurance companies and their affiliated organizations/partners, mortgage and small business lenders and their customers. ISL offers two products:

IV Software. Our Web-based “Insurance Valuer” (IV) software will provide insurers with the ability to far more accurately assess risks they are insuring, allowing them to price those risks accordingly and provide enhanced services and solutions to their customers. In addition, our mortgage and small business lending clients will be able to ensure that the collateral they are using to secure their loans is properly valued and insured to minimize their financial risk should the collateral property be damaged, lost or stolen. For direct-to-consumer sales, the IV software offers an accurate and independent valuation of property, and links to insurance agencies and replacement property websites for immediate response.

Documents Plus. Provides consumers with electronic storage and retrieval of vital insurance, legal and financial documents and other information, accessible online from anywhere in the world. Our solutions will provide consumers with the peace of mind that the value of their property and contents insurance are fully covered and that their vital insurance, legal and financial documents and information is up-to-date and is safely stored and fully accessible.

The IV software has been sold to, and successfully implemented by, a number of the major insurance providers in the Australian market, providing the ISL the ability to showcase proven operations and capabilities.

The Management Team
ISL’s management has proven entrepreneurial and management skills to succeed with a rare combination of consulting and direct operational experience within the insurance and broader financial services marketplace. ISL is a privately-held Limited Liability Corporation (LLC), jointly owned by its three chief officers and an advisor, Michael Bartlett, the founder of ISL’s Australian affiliate, International Cost Research (ICR). The three managing partners are president and Chief Executive Officer (CEO), Hugh Lloyd-Thomas, Chief Operating Officer (COO) Mark Purowitz, and Chief Information and Technical Officer (CIO) Mark Metcalf. A minority stock is reserved for a fifth investor who can provide us with the additional $92,500 needed for start-up costs.

The Opportunity
Potential customers with whom we have spoken are disappointed in our competitors’ products and have, without exception, shown significant interest in our solutions. Industry estimates, significant research, and interest on the part of potential customers have led to our projections of reaching a strong net profit in the first year. These are conservative projections, and reflect our products’ ability to assist the insurance industry to increase their premium revenues by approximately $4.7 billion per year.

The Investment Offering
Based on conservative projections, the founders intend to buy out this $92,500 start-up investment in the third year at roughly $750,000.

1.1 Keys to Success

The keys to our success will be our unique and complementary online data-retrieval systems, which fill a substantial void in the insurance market today. We will utilize our state of the art technology to:

• Closely meet the needs of each customer;
• Clearly differentiate our solutions from competitors;
• Offer superior service.

ISL will create high product visibility and consumer awareness of our solutions by a consistent and carefully targeted marketing strategy. We will establish a brand identity and leverage good client relationships to enhance credibility and encourage growth. 

1.2 Objectives

Successfully and profitably market our property and contents valuation software and additional solutions to insurance companies and consumers.

• Solutions marketed to insurance company clients to achieve $3.0 million in sales by Year 3.
• Web-based consumer solutions to achieve $1.5 million in sales also by Year 3.

1.3 Mission

ISL will:

• Provide insurers the ability to far more accurately assess risks, allowing them to price those risks accordingly and provide enhanced services and solutions to their customers.
• Give mortgage and small business lending clients the means to ensure that the collateral they are using to secure their loans is properly insured, to minimize their risk of loss should the collateral property be damaged, lost or stolen.
• Deliver peace of mind to consumers, with the assurance that the value of their property and contents insurance is fully covered and that their vital insurance, legal and financial documents and information are up-to-date, safely stored and fully accessible.

ISL will become the premier provider of Web-based property and contents valuation software and additional information solutions. Our products utilize an online data-retrieval system to offer up-to-date risk assessment cost data to insurers, property valuation to mortgage and lender groups, and secure insurance and valuation documents storage to consumers.

ISL is a privately-owned Limited Liability Corporation, currently located in the “Executive Suite” facilities at 50 Washington Avenue in South Norwalk, Connecticut. These facilities are centrally located, with easy access and travel to our potential major clients, partners and affiliates.

2.1 Start-up Summary

As outlined in the following table, our start-up costs come to $292,250. These requirements include expenses for the cost of data, IV software models and licensing fees, and first month’s salaries. Additional large start-up items include marketing and branding consulting services and costs for the initially outsourced server hosting. Information systems will eventually be brought in-house, dependent upon future development needs and cost analysis. Other usual start-up costs include legal, stationary, and expenses associated with opening our first office. We are in the process of confirming the sourcing of $200,000 from the company founders and key executives. Based on ongoing discussions, there is also a potential for the sharing of expenses with partner and affiliate organizations.

We require additional funds of $92,250 to sustain our cash reserves during the critical first year. We are seeking investment in that amount in exchange for a non-managing interest in the business.

Based on market research and data from our Australian affiliate, we project that the company will be profitable in its first year. By the end of the third year, investors will be bought out by the founding partners.

The tables below show the details of our start-up requirements and funding sources. Short-term assets to be purchased include office furniture, servers, phones, a fax machine, and a copier.

2.2 Company Ownership

ISL is a privately-held Limited Liability Corporation (LLC), jointly owned by its three chief officers and an advisor, Michael Bartlett, the founder of ISL’s Australian affiliate, International Cost Research (ICR). The three managing partners are president and Chief Executive Officer (CEO), Hugh Lloyd-Thomas, Chief Operating Officer (COO) Mark Purowitz, and Chief Information and Technical Officer (CIO) Mark Metcalf.

Additional minority stock has been set aside for outside directors which will include insurance industry, legal, marketing and retail resources and expertise.

Insurance Valuer (IV) Software

ISL’s Web-based “Insurance Valuer” (IV) software lets our customers determine insurance coverage needs for both property and contents insurance far more accurately than our competitors’ paper-based valuation methods. By offering the data retrieval system online, we can keep our risk assessment costs and valuation estimates up-to-date and accurate without costly distribution of printed materials. IV is designed to be used by insurance companies, mortgage providers, small business lenders, consumers and ancillary industries associated with the property and casualty insurance industry.

The IV software is an easily implementable tool that will significantly increase our corporate customers’ premium income revenues, while enhancing their ability to improve customer service and retention. For direct-to-consumer sales, we will initially focus on consumers in high-risk areas: Southern California’s wildfire districts, Florida’s hurricane zones, and areas prone to flooding.

This software is currently unique in the insurance assessment industry, and allows us a short window of time (2-4 years) to become the “first-mover,” gaining a brand identity and customer loyalty before competitors can reverse-engineer our products.

Additional Links and Updates

Through our links to contents and services providers, insurance companies will be able to provide their customers with rapid replacement of their lost / stolen / damaged property and/or contents at significantly reduced cost, further enhancing customer service, loyalty and retention.

The direct-to-consumer version of IV will include additional, individually-selected information, reminders and updates to alert them to market and/or regulatory changes that may impact their insurance, financial and legal affairs.

Documents Plus

Documents Plus is a Web-based system for direct sale to consumers. It allows for secure electronic storage and retrieval of important documents and information to support consumers’ insurance and security document needs. As a portable, access-anywhere database, Documents Plus allows consumers to download or print their digital images for insurance value verification, insurance policies and documentation, legal and security documents (wills, mortgage documents, investment securities and statements), and more, with the peace of mind that a secure, encrypted, and certified system allows.

Despite warnings from the insurance industry, many customers continue to store important documents and proof of ownership or policies in unsecured locations. If their house burns down, their documents burn. If their jewelry is stolen, they have no recent pictures to assist police in locating it. Documents Plus will be sold direct to consumers and through affiliated insurance companies as a secure storage for all of their document access needs. No need to go all the way to the bank to open a safe-deposit box; simply open your Documents Plus online account when you establish your insurance account, and upload pictures and documents from any convenient location.

Insurance Sector

Since 1972, Home Owner Multi Peril Premiums have grown at a compound annual growth rate (CAGR) of 10% per annum. Home Owner Multi Peril Premiums (HOMPP) are estimated to have reached $43.7 Billion dollars in 2003. However, there is currently a chronic level of under-insurance in both property and home contents insurance in the U.S. home market. This problem is bad for consumers, who are usually unaware that they are not fully covered; it is bad for insurers, who lose out on the additional premiums they could recoup for full coverage; and it is bad for lenders, whose collateral may be at risk.

A survey of over 5 million policies determined that between 70% and 80% of homeowners are under-insured and the increase needed to provide adequate coverage is 35%. Additional research has shown that a 17% increase in premiums would be required to realign those policies with the required level of coverage. Furthermore, in an additional survey, 94% of respondents indicated they would be willing to pay additional premiums in order to be properly insured.

As outlined in the following table, by providing policy holders and potential customers with the ability to more accurately estimate their insurance needs, the IV software will assist insurance industry participants to identify potential increases in annual premium income of over $4.7 Billion based on the aforementioned industry estimates and surveys.

(1)(2) (3) (4) (5) Industry Surveys
(6) 2003 Estimates based on Insurance Information Institute / AM Best Statistics
(7) % of Clients over-insured X %’age Level of over-insurance X HOMP Premium $ X 50% Premium
(8) % of Clients Under-insured X %’age Level of Under-insurance X HOMP Premium $ X 50% Premium Increase
(9) Under insurance premium increase – Over insurance premium decrease

Based on industry statistics and our ability to provide a Return in Investment (ROI) of 20:1 to our insurance industry clients, we are confident in our ability to generate annual revenues of $200 Million to $250 million from our Insurance Valuer solutions as the organization grows.

Additional Sources of Revenue

• Referral / click-through fees from product and service providers to whom we will deliver qualified / bona fide customers that require replacement products and services from losses and/or insurance claims.

4.1 Under-Insurance

ISL’s success will be further supported by the growing pressure on insurance companies to assist consumers in accurately estimating the replacement cost of their homes and other valuables. A number of recent legislative efforts have addressed this concern, and ISL is well-positioned to take advantage of this weakness in the insurance industry. The following article in reference to the California wildfires illustrates dramatically the significant need in the marketplace for ISL’s solutions and services.

HEADLINE: Wildfire victims say insurance companies misled them on coverage
BYLINE: By ELLIOT SPAGAT, Associated Press Writer
DATELINE: SAN DIEGO

Many Southern California homeowners who thought they were fully insured against natural disasters have discovered after last year’s wildfires that their policies left them in the lurch – in some cases hundreds of thousands of dollars short of what they need to rebuild.

Dozens of homeowners told California Insurance Commissioner John Garamendi during public forums over the last week that insurers wrote policies based on their calculations of a home’s “replacement cost,” only to learn that the insurers’ estimates were grossly inadequate.

Consider Don Halte, 64, who said the replacement cost listed on his Farmers Insurance policy was $200,000 below the actual cost of rebuilding his home in Crest, a mountain community east of San Diego, which was destroyed last October. “I thought replacement meant replacement,” he said to applause from an audience of about 300 people Monday night at Shadow Mountain Community Church in El Cajon, a San Diego suburb. “A gentleman here has a dictionary. Maybe I should look at it.”

The communities east of San Diego were among the worst hit by the October wildfires, which destroyed more than 3,600 homes across Southern California.

Lynda Martin, 46, said she called State Farm Insurance only two weeks before her home burned in Alpine, also east of San Diego. She asked if her coverage was adequate, noting that the assessed value of her home had more than doubled since she bought the policy about eight years earlier.

Martin said she was told that she had “excellent coverage” and was discouraged from buying more. As it turns out, she says it will cost $485,000 to replace her home, well above her policy’s listed replacement cost of $209,950.

After three forums in San Diego County and one in San Bernardino County, Garamendi said he was launching a special team to investigate complaints, promising a “complete, thorough audit.” If investigators uncover patterns of wrongdoing, insurers could be barred from doing business in California or be ordered to pay heavy fines, he said.

“I’m giving (the insurance companies) bad marks,” said Garamendi, who only two months ago praised the industry for its response to the fires. “I’ve gone through four of these hearings and these problems are serious, they’re pervasive, and the biggest insurance companies in this nation are not properly handling claims. … Clearly, they have disobeyed the law.”

Some homeowners told Garamendi they have been assigned five or more adjusters, creating long delays as each one got up to speed. Others criticized insurers for haggling over itemized lists of personal belongings lost in the fires.

But most complaints concerned allegations that insurers misled homeowners into believing they were fully covered. Four law firms recently teamed up to sue carriers on behalf of wildfire victims who say they were wrongfully left unprotected.

Garamendi said insurance companies may have “low-balled” the estimated cost of replacing homes in an effort to sell more policies.

Insurance company officials who attended the forums declined to discuss individual cases but denied widespread wrongdoing. A State Farm spokesman, Bill Sirola, said it made no sense to low-ball the replacement cost because the company would effectively be denying a chance to collect higher premiums.

—On the Net:

http://www.insurance.ca.gov/

GRAPHIC: AP Photo CADIU101

LOAD-DATE: April 28, 2004

4.2 Market Segmentation

As stated above, our basic target market segments are consumers, insurers, mortgage and small business lenders, and ancillary industries associated with the casualty and property insurance industry.

The market segmentation plan for insurance companies reflects industry standard definitions for Large, Medium and Small insurers based on analysis by AM Best & Company, National Association of Insurance Commissioners (NAIC), and the Insurance Information Institute (III), the major information collation and reporting organizations for the insurance industry. In the 1997 U.S. Census, there were 20,903 property and casualty insurance carriers, doing $299 Billion worth of business within the United States. In the last seven years, the industry has seen significant growth.

The individual policy holder segment includes individuals with internet access and home owner policies / insured properties currently underwritten in the United States. Our estimates are based on NAIC and III statistics, which estimate that there are currently 77 million homeowner insurance policies in force in the United States. According to a recent Nielsen//NetRatings survey, nearly 75% of U.S. households have Internet access at home. Our initial potential consumer market is nearly 58 million households, with high growth.

The mortgage broker and small business lender estimates are based on Risk Management Association (RMA) and Mortgage Broker Association market estimates.

4.3 Target Market Segment Strategy

All of our prospective customers share the need for reliable, accurate, and current information about property valuation and risk assessment. Our extensive market research reveals that existing insurance industry sources for property replacement and construction data cannot update their information regularly enough, nor keep a broad-enough range of data available, to accurately assess insurance coverage needs. Additionally, consumers have been all but ignored in the current policy origination and underwriting process.

Our strategy is to focus on large insurers that carry the significant percentage of the home property and contents market. Based on Insurance Information Institute statistics, the top 10 insurers account for 60% to 65% of the total premium dollars collected each year. These insurers, due to their large policy numbers and resulting larger premium base will benefit in greater dollar terms in premium increase through the utilization of the Insurance Valuer Software. These insurers also attract the majority of consumers to their websites and account for a significant percentage of Web-driven enquires.

The medium and small sized insurer segments have yet to adopt aggressive Web-based distribution strategies and rely on agent-driven referrals for business. However, as they have been a neglected segment of the market, we will aggressively pursue opportunities to allow us to increase market and consumer “top of mind” awareness.

Our largest potential market segment, and the most neglected by current industry groups, is the end-user – the insurance consumer. The general populace needs to know the value of insurance, the dangers of under-insurance, and the best ways to accurately assess their property’s value. In addition, they often need secure storage of their insurance documents and proof of ownership for important items. Our software solutions will meet their needs.

4.4 Service Business Analysis

As previously outlined, there are currently no web-based valuation applications available in the North American market today, while there is a chronic level of under-insurance in both building and home contents insurance in the U.S. home market. ISL will be the first Web-based organization to provide solutions and services to the insurance market and deliver them in an integrated and far more customer focused fashion.

After reviewing the current marketplace, customer needs, and the competitive situation, we identified significant market opportunity which is driven by a number of factors:

• Consumers have not been made aware of the under-insurance risk that they face and have been significantly underserviced by the existing solutions, services and providers.
• Ancillary service providers within the insurance process e.g., general agencies and independent agents are not able to access customer focused solutions.
• Small business and mortgage lenders have been similarly ignored by the current market providers.

Additionally, our research has shown a significant degree of customer dissatisfaction and resentment toward our most likely competition in terms of pricing, service and provision of additional products and services.

The insurance industry currently gets data from in-house review and from a few large research agencies. Depending on the size of the business, the data may be more or less current and comprehensive. Franchise insurance agents often store such data centrally with online data retrieval for individual agents. This kind of data provision has paved the way for our products, but cannot compete with our prices, customer service, or additional solutions.

4.4.1 Competition and Buying Patterns

Competition

The market for building material and construction cost information utilized in the insurance industry underwriting and claims management processes is dominated by Marshall & Swift/Boeck (MSB).  MSB has a number of product offerings including paper, telephone and PC based products. They also provide customized consultancy products and Web-based access to the underlying product (s) and information. However, MSB does not provide web-based access for consumers to determine their insurance needs.

In addition, unlike the IV software, the MSB costing database is not based on a Dynamic Elemental Modeling process (DEM) which uses real time building cost information, but rather on a factoring approach, which inherently is not as accurate as the DEM approach.

MSB does not provide its insurance industry clients with contents value calculation capabilities, a service that will allow ISL to immediately differentiate our solutions from our competitors.

MSB’s efforts have largely focused on the claims and underwriting process and have ignored the consumer facing opportunities and services. Only a few new features are added on an ad-hoc basis, and development of their existing solutions has been significantly constrained. Additionally, MSB has not broadened their scope to include services to small business lenders, mortgage lenders or additional service and/or solution providers.

Buying Patterns

As previously mentioned, the provision of an alternative source for information and/or services would be welcomed by the industry. MSB is perceived in the marketplace as utilizing its dominant position to its sole advantage and to the significant disadvantage of its customers.

We will take advantage of our position as a new and innovative player in the marketplace. The IV software has been developed to be “data agnostic”.  Existing MSB customers, even if they are locked into longer term contracts, can still use the IV software while maintaining their current MSB contractual relationships.

Insurance industry executives are by nature conservative, and tend to put a great deal of weight on the vendor’s reputation, rather than just on the particular merits of the product or service being offered. While this tends to favor more established companies, it can work to the advantage of a newer company that carefully crafts a very specific and favorable image for itself.

Other financial services organizations, including small business and mortgage lenders, are less conservative in their approach and appear to be more willing to move to new and more innovative solutions. However, they can also be restricted by constrained decision-making processes and time-frames.

However, buyers are increasingly expecting additional and integrated solutions. As more innovative solutions are offered, buyers are taking advantage of them.

In addition to providing added value and integrated solutions, we will be able to take advantage of our existing customer base and implementations in Australia. Reference to existing customers will speed the evaluation and analysis process demonstrating the capabilities of our solutions in a live environment. This will allow us to mitigate any concerns that US customers may have that our solutions are not fully developed and/or operational.

As previously mentioned, additional points of differentiation for ISL in the marketplace which will allow us to positively influence buying behavior will include the distribution and technical partnerships with existing industry leading automated application, decisioning and policy management providers and consultants.

As outlined in the Marketing plan, ISL will operate as a software vendor and market directly to “End User” clients. Additionally, ISL is in the process of developing a number of affiliations and partnerships with major software and services providers to the insurance and financial services market. These additional distribution channels will supplement and enhance the performance and functionality of ISL’s affiliates and partners products and services.

ISL will market directly to consumers through consumer communications e.g., financial advisory television and radio programs, Web-based promotions, our direct website and general market advertising strategies.

Positioning

We will position our solutions as the quality and innovation leader by emphasizing our superior integrated functionality and flexibility. Our enhanced engineering and technical leadership will allow ISL to market our high performance and state-of-the-art capabilities to a broad range of customers, service providers and partners.

We will also position ourselves as providing highly customized solutions to clients and consumers, and will be highly flexible and responsive in adapting our solutions to the needs of the marketplace. Being a younger, smaller and more customer-focused company than our competitors, we will have the advantage of being an industry innovator.

5.1 Competitive Edge

ISL will be a profitable and successful company for several reasons: the proven performance of the IV software; the development of affiliations and partnerships with major software and services providers to the insurance and financial services market; the ease of implementing our tools; the ability of the IV software to significantly increase customer revenues while enhancing their ability to enhance customer service, improve retention and provide their customers with peace of mind.

ISL’s unique products fill a substantial void and will enable ISL to establish itself as the pre-eminent valuation solution provider in the market. While potential competitors have focused on providing costing information to the underwriting and claims operations within the insurance industry, there are currently no Web-based valuation applications available in the North American market. In addition, our competitors do not have the ability to combine personal contents coverage data and document storage and retrieval services.

ISL will be able to expand and protect its market share through embedding IV into third party insurance software solutions. ISL’s sales and distribution strategy will be further enhanced with the development of alliances with the major insurance industry service providers and consulting firms.

As proof of the concept for the U.S. market, the software has been sold to, and successfully implemented by, a number of the major insurance providers in the Australian market. ISL will duplicate and expand this success into the U.S. market. Future plans include expansion into Canada, the United Kingdom and Europe. Our distinct advantages by target market include:

Insurance companies, general agents and brokers:

• Currently no Web-based valuation applications available that are focused on both the front-end application process and the consumer
• Alternative “static” offerings are PC, paper, telephone and/or written survey based
• Potential competitors are significantly more expensive and provide less functionality
• ISL’s Dynamic Elemental Modeling process (DEM) uses real time cost information rather than the inherently less accurate factoring approach used by competitors’ products

Consumer based solutions marketed directly to retail customers:

• Contents coverage calculators and information are not provided by potential competitors
• Additional information, information services and information storage solutions will be provided to enhance customer service and provide differentiated solutions

Retail product and service providers:

• Links to product and service providers to ensure the most immediate available replacement of lost and /or damaged possessions
• These links will in turn provide our partners with qualified / great customers 
• Customers will then be able to take advantage of enhanced service and reduced prices

In addition to direct sales to insurers and consumers, ISL will be able to expand and protect its market share through embedding our Insurance Valuer software into the third party insurance software solutions through the wealth of contacts between these providers and senior ISL management.

ISL’s sales and distribution strategy will be further enhanced with the development of alliances with the major insurance industry service providers and consulting firms.

5.2 Marketing Strategy

ISL will market the web based “Insurance Valuer”  (IV) software directly to Insurance companies, General Agencies, mortgage providers and ancillary industries. ISL will operate as a software vendor and market directly to “End User” clients. Additionally, ISL is in the process of developing a number of affiliations and partnerships with major software and services providers to the insurance and financial services market.  These affiliations and partnerships will provide ISL with additional distribution channels for the IV software and will supplement and enhance the performance and functionality of ISL’s affiliates and partners products and services.

The consumer base will initially be targeted through combined broad media and targeted Internet-based education campaigns, on the value of accurately insured property values. The campaign will include the provision of value-added hosting solutions for the electronic storage and retrieval of important insurance, legal and securities documentation and reminders for policy and documentation review (s). As we increase awareness amongst consumers of the risks they face in being under-insured, the greater value our services will accrue. The broad media campaign will include spots and conversations on financial news networks such as MSNBC, CNN, CNBC etc., and the major broadcast networks’ news shows, such as The Today Show on NBC, and Good Morning America on ABC.

Small business lenders will be targeted through direct and affiliate sales campaigns to highlight their need to protect their interests in individual property which provides the major share of collateral / security used to secure loans to new and/or existing small businesses. If a small business owner’s home and property were not adequately insured and they were to suffer a loss, and their business were significantly impacted, the lender would potentially not be able to collect on the loan. 

Mortgage lenders and real estate organizations will also be targeted through direct and affiliate sales campaigns to enhance their ability to provide value added services to their clients when they are researching the cost of purchasing and owning new and/or additional property.

The provision of our integrated suite of solutions across the broad range of financial services providers and direct to consumers will further enhance our marketing strategy by differentiating ISL from our potential competitors and help protect our revenues from significant market fluctuations.

5.3 Sales Strategy

Our sales strategy is based on the superior quality and functionality of our solution:

• Underlying property replacement cost data
• Consumer-oriented and -empowering approach
• Additional contents valuation data and functionality
• Additional digital record and documentation storage facilities and services

Initial sales efforts will be focused on three areas:

1. Top 10 market share accounts (based on percentage of premium dollars which account for 60% to 65% of the market)
2. U.S.-based operations of organizations that already utilize the Insurance Valuer solution in Australia
3. Web-based, direct-to-consumer operations

We will support and enhance our direct sales efforts through the development of strategic partnerships and distribution arrangements where the IV solution will be an integral part of our partners and distributors broader solutions. Partnership discussions are already in progress with a number of the major providers of existing industry leading automated application, decisioning and policy management providers and consultants. The senior staff of ISL has significant associations and careers in direct and consulting roles across the insurance, small business and mortgage lending industries as well as retail and marketing experience.

Our primary sales method is face-to-face selling, particularly to senior underwriting and consumer marketing executives. Our sales tactics differ from our principle competitors in that we approach both senior executives and operational resources to ensure acceptance and maximum utilization of the functionality of our solutions.

Because so much of the market is concentrated at a few major accounts, the core of our sales effort is selling to these few companies. While we are certainly pleased to get orders from mid-sized and smaller accounts, we will focus our efforts overwhelmingly on the key accounts. Being a relatively small company with limited resources, we would rather focus all of our effort on covering a few accounts really well, rather than covering many accounts less thoroughly. Also, the smaller accounts tend to eventually buy many of the same solutions as the larger accounts even without any direct sales efforts.

We will also use the Internet to distribute our solutions and services directly to consumers and to attract new customers. We will publicize our website in appropriate media, journals and trade publications with references in the major search engines, and links to related websites of existing and potential clients, partners and affiliates and data and service providers.

Sales terms

We will sell to businesses on established net 30 day credit terms, with payment for two year’s maintenance in advance at 20% of software price. Unpaid invoices will be charged at 1.5% per month.

We will provide our direct-to-consumer solutions, including individual valuation services, document and information storage services, on a cash basis. Consumers can choose to buy the service for 6 months, one year, or two years, with renewal options at the same price.

In the first year, we will also offer a “pay per valuation” service, where consumers can get an accurate valuation of their property immediately for a set fee. We will then refer consumers who utilize the service on a “pay per valuation” basis to those insurers who also use the service. Consumers will realize additional and immediate benefits from their purchase and insurers will be provided with qualified / under-insured leads rather than ‘browsing’ consumers.

5.3.1 Sales Forecast

Insurance Valuer – Insurance, Documents Plus and Consumer sales forecasts are all based on conservative first year growth figures with lower dollar figure sales assumed during the first year. Figures below are rounded to the nearest $10K level based on initial sales figures and annual growth targets.

Insurance Valuer – Insurance, Mortgage and Lender groups

ISL’s Australian affiliate has seen strong sales in initial offerings. Our projected sales forecasts for industry groups are based on initial contacts with representatives of the major American insurers, market research, and the better price and quality values we offer our clients, compared to current competitors. We expect rapid growth in the second and third year, as end-user market “follower” organizations see the value and results being achieved by the innovator / first adopter organizations.

Documents Plus

First year sales of $370,000 with achievable growth target of 30% per year

Insurance Valuer – Consumer Solutions

First year sales of $700,000 with achievable growth target of 30% per year

Similar growth figures have already been achieved by our Australian affiliate organizations. Please refer to the attached International Cost Research Sales and Revenues spreadsheet for further detail.

As a percentage of revenues, sales costs will remain relatively stable, with a small increase expected in packaging and shipping in years two and three, as we distribute the software to more and smaller groups and to individuals.

5.4 Milestones

The following table lists important program milestones, with dates and managers in charge, and budgets for each. The milestone schedule indicates our emphasis on planning for implementation. The most important programs are the sales and marketing programs listed in detail in the previous topics.

Our commercial-customer website will showcase the Web-based capabilities of the IV software, as well as the portfolio of current big-name customers, both domestic and international. To further highlight the value of the IV software, the website will provide resources, research and weekly newsletters to interested parties.

The consumer website will provide independent valuation services as well as secure digital document storage, automated updates and notifications to consumers regarding their insurance and legal needs. The consumer website will also provide links to ISL End-User insurance and ancillary service providers, who will provide additional services and discounts to ISL clients.

The customer service area of both Web site will explain basic service issues, offer lists of other resources for help, lists of frequently asked questions and answers, an extensive searchable database of service/support information, the ability to e-mail for help with highly specific questions, and current postings of newly discovered service suggestions and recommendations.

6.1 Website Marketing Strategy

As outlined in the previous Web Plan Summary, our website network has three main areas of focus:

1. Resource site devoted to End-User B2B client information and service enhancement.
2. Sales site where consumers can utilize ISL services and link to insurance service and ancillary service providers.
3. Tools for insurance and ancillary service providers to access “qualified” consumer and customer opportunities.

Our website is critical to our marketing strategy. It offers potential customers the opportunity to see our software’s key features, read customer reviews, and purchase trials of the software. We will market the website with paid search-engine keywords, click-through advertising from related insurance industry and consumer sites (Consumer Reports, our affiliated insurance agents/companies, and so on). We are currently researching customer online behavior around seeking insurance and valuation information. The results of this research will guide our choice of online affiliations and spending.

6.2 Development Requirements

The ISL website will initially be modeled on the existing International Cost Research site established in Australia. We will work with our contracted branding and marketing consultants to further enhance the functionality and services of the website.

The maintenance of the site will initially be outsourced to our contracted branding and marketing resources. As the website rolls out future developments and enhancements, an internal technical resource may be required.

The company will be managed by the founding partner and two senior executives, whose individual areas of expertise cover all of the functional aspects of the business. Hugh Lloyd-Thomas will serve as the President and Chief Executive Officer of the Company, and will be responsible for the strategy development and marketing of ISL services and solutions. Mark Purowitz will be the Chief Operating Officer of the Company, in charge of internal operational areas as well as assisting in the marketing of ISL’s solutions and services. The Chief Information and Technical Officer of the Company will be Mark Metcalf, overseeing the information technology, web hosting and delivery systems of ISL.

These key positions will be supported by a full-time staff consisting of 3 employees, working in the areas of administrative and sales support, technical, and operations. Initially, part-time staff and independent contractors will be utilized to accomplish several operational functions, including branding and marketing development, accounting and taxation, legal, and Human Resources functions. As the organization grows and cost / benefit analyses justify, the aforementioned functions will be brought in-house.

7.1 Personnel Plan

New staff will be added as the company achieves predetermined revenue benchmarks. As reflected in the financials, the total number of staff positions will reach 9 by the end of year one, 10 by the end of year two, and we expect to have 12 staff members by the end of year three. Our recruitment strategies for identifying candidates and hiring individuals to fill these positions will be based on a combination of referrals and utilization of staffing consultants / recruiting agencies. When new hires are accomplished, subsequent orientation and training will be the responsibility of the HR & Operations Manager.

We recognize that human resources are an extremely important asset. Hence we will screen new applicants very carefully including in-person interviews and reference checks. We will review each employee’s performance regularly, and when possible promote from within. Our salaries and benefit packages will be competitive with those offered by other firms in our area.

Utilization of outside resources
To obtain specialized expertise the company will engage the services of outside contractors and freelancers. The following roles will initially be performed by outside contractors and/or outsourced vendors:

• Legal Services
• Accounting and Tax services
• Consumer and contents data gathering and research

Customer Service
We intend to prioritize customer service and make it a key component of our marketing programs. We believe that providing our customers with what they want, when and how they want it, is the key to repeat business and to word-of-mouth advertising. Not only will we train our employees to deliver excellent service, we will give them the flexibility to respond creatively to client requests. In addition, we will continually monitor our clients’ level of satisfaction with our service through surveys and other convenient feedback opportunities.

Business Development & Sales Force
We will employ 3 to 4 Sales Personnel, most charged with demonstrating our product to potential clients and closing sales with large insurers. One Sales officer will be in charge of direct-to-consumer selling for the IV and Documents Plus software.

The most important element in the financial plan is delivering on our key cash flow drivers:

1. Focus on building revenues through innovative approaches to the market.
2. Ensure gross and net margin efficiency through a very competitive cost structure.
3. Ensure adequate funding for operational and development expenses that is in line with our balance sheet needs and capabilities.

8.1 Important Assumptions

The financial plan depends on a number of important assumptions, most of which are shown in the following table. The key underlying assumptions are:

• A medium-growth economy, without major recession
• No unforeseen changes in technology to make our solutions immediately obsolete
• Continued growth in the utilization of technology and the internet by consumers and organizations for access to and the delivery of products and services
• Access to equity capital and financing sufficient to maintain our financial plans and estimates

We have applied conservative growth estimates to both the commercial and consumer direct business lines. As an example, we have assumed a 10% monthly growth rate in our Documents Plus storage solution and a 25% monthly growth rate for our Insurance Valuer – Consumer solution. A similar, although noncompeting credit education and monitoring service, with which we are in the process of affiliating, has grown to 3.5 million customers and over 5.1 million transactions in only three years.

8.2 Break-even Analysis

For our break-even analysis, we assume running costs based on when we are fully operational. These costs include our full payroll, rent, utilities, website maintenance, and an estimation of other licensing, data acquisition costs, and marketing budgets. 

While margins are harder to estimate, based on sales achieved in our Australian operations, we are confident that we can achieve gross margins above 90% and solid net profits in the first year. These margins will improve as we are able to develop our revenue streams while utilizing existing infrastructure and system functionality.

In accordance with the aforementioned assumptions, the break-even analysis shows what we need to sell per month to break-even. This is in line with our planned 2005 to 2007 sales levels, and we are very confident that we can achieve and exceed these targets.

8.3 Projected Profit and Loss

Our Gross and Net Margin targets are based on very achievable first year sales figures, and annual growth targets are based on the experience of our affiliate in the Australian market, International Cost Research.

We are extremely confident that we will be able to achieve and exceed these estimates, partly through our direct-to-consumer offers of the Insurance Valuer and Documents Plus services.

Both our Gross and Net Margins are significantly above the Risk Management Association (RMA) averages for similarly sized organizations with $1 million to $3 Million in sales. Margins will continue to improve as our revenues increase exponentially without significant increases in costs.

8.4 Projected Cash Flow

Cash flow from operations is based on a conservative set of assumptions, both in terms of our sales forecast and expenses. The principal uses of funds are to assist in covering the initial expenses as outlined in the Start-up Table, salary expenses, as outlined in the Sales Forecast Table and day-to-day expenses outlined in the Pro-Forma Profit and Loss Table. The major operational expense include the licensing fee for the property valuation software at $100,000 per year, initial branding and marketing campaign expenses at approximately $75,000 for the first year and the licensing fee for the property valuation data at $50,000 per year.

While we are in the process of raising $200,000 from the two company founders and the two senior executives who will be joining the organization, in order to effectively launch the business, we project a total need for $92,500 in start-up financing to provide funding for the first year of operations.

Based on market research and data from our Australian affiliate, we project that the company will be profitable in its first year. By the end of the third year, investors will be bought out by the founding partners. Details of the investment offering and buyout are negotiable; projected minimum dividend amounts can be found below, in the Cash Flow table.

8.5 Projected Balance Sheet

With the inclusion of start-up funding, our balance sheet is solid and we do not project any issues in meeting our obligations. With our innovative solutions and determination to keep costs low, our balance sheet will continue to strengthen as we increase our revenues and retained earnings, allowing us to decrease our initial reliance on outside funding.

8.6 Business Ratios

ISL is part of the Business-Oriented Computer Software industry (SIC Code 7372.9902). The Ratios Table, below, shows some standard ratios for our company with comparisons to industry standards. The additional measurements shown in the Ratios Table are significantly above the Risk Management Association (RMA) averages for similarly sized organizations with $1 million to $3 Million in sales. Again, our margins will continue to remain high, as our revenues increase.

With the availability of the start-up financing we are seeking in addition to the up-front investments by the founders and senior executives, the organization will have a solid financial position. As with our gross and net margins, our debt to equity and current ratios, as well as our Net Working Capital are particularly strong when compared to RMA and other providers of standard industry data and benchmarks.