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EXECUTIVE SUMMARY
Energex Inc. (Energex) is a company based in Richmond, British Columbia that
produces intelligent occupancy sensors. The sensors regulate heat and light in the room
when the room is not being used. The product saves 35% to 45% of total energy
consumption and energy costs.
Energex competes in the energy efficiency solutions industry, which is currently in the
growth stage because there are very few companies competing in the industry. A few
companies, such as InnCom and Energy Eye, are beginning to threaten Energex’ market
share as they capitalize on the growing demand for energy efficient technologies.
Research indicates that Ontario would be a beneficial location for expansion because
Ontario has high energy costs and usage, extreme summer and winter temperatures,
large population, and Ontarians are concerned with environmental issues. Short-term
markets, such as student dorms and extended care facilities; and long-term markets,
such as hospitals, hotels, and large office buildings, appear to have a great need for this
type of technology as a result of their massive energy consumption, outrageous energy
bills, and their increasing need to be environmentally conscious.
In order to successfully sell to the identified target market(s), several marketing tactics
have been developed with the goal of increasing sales and brand awareness. These
tactics include a combination of sponsoring environmental awareness events, personal
selling via direct contact with clients, distribution of promotional flyers in electricity
bills, creating strategic alliances with eco-consulting firms and Ontario Power
Authority, expansion of online web advertising and networking, bus sign advertising,
pilot projects to create referrals, and finally the development of a simplified and
cheaper sensor that will be sold in retail stores.
The total annual cost of the marketing tactics will be approximately $20,000. It is
anticipated that these tactics will generate 22 large clients in the first year. This indicates
a customer acquisition cost of about $900. These customers are expected to generate
revenues of $343,500 at a selling price of $300 per unit. Although the acquisition cost is
high, the profits from a customer significantly outweigh the cost of acquiring them.
In order to begin operations in Ontario, a warehouse will be needed in Mississauga. The
warehouse will be leased at a cost of $26,400 annually. The warehouse will be used as a
base of operations for making sales and as a receiving and distributing point for
sensors, coming from British Columbia and going for installation in Ontario. Additional
items such as office equipment and furniture and transportation costs will also be
required. The total cost to start-up operations in Ontario is approximately $80,000.
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In order for the Ontario division to break-even in year one, 890 units must be sold. It is
anticipated that 1,160 units will be sold in year one. The forecasted number of units sold
increases in the following year at a greater rate than the break even point. This positive
trend continues into the third year as well. The summary table of expected sales, net
income, and break-even in units for 2009-2011 is provided below:
2009 2010 2011
Sales ($) $348,000 $705,000 $1,101,000
Net Income ($) $54,015 $137,781 $230,698
Break-even (units) 890 1474 2144
Sales (units) 1160 2350 3670
Energex Ontario is expected to turn cash positive during the fourth quarter of 2009 and
will cover the start-up capital during the first quarter of 2010. ECG is looking for
$80,000 investment to set up operations in Ontario. In exchange, the investor will
receive 29% of the company. To calculate these numbers, the fundamental method of
valuation is used. Pro forma net income figures for 2009-2012 are discounted at a rate of
25%. These numbers ($65,255 in the first year, $151,734 in the second year, and $243,675
in the third year) are net incomes of both, Energex and Energex Ontario. The net present
value of Energex as a whole is $274, 076, based on the future cash flows.
Rami Belson, founder and CEO of Energex, will lead the expansion of Energex into the
Ontario market. He is an asset to the success of the venture due to his expertise and
knowledge within the field. Energex Consulting Group comprises of Royal Roads
University students, who major in Entrepreneurial Management. The team has relevant
and valuable experience in marketing, communications, international trade, logistics,
and business administration. The expansion of Energex into Ontario will be a profitable
endeavour that will be recorded as a significant step for the growth of Energex.
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TABLE OF CONTENTS
Introduction .................................................................................................................................. 5
Methodology................................................................................................................................. 5
Product .......................................................................................................................................... 6
Innovation ................................................................................................................................. 6
Intellectual Property Protection ............................................................................................. 7
Value Proposition..................................................................................................................... 7
Operations Plan & Logistics ................................................................................................... 8
Business Location ................................................................................................................. 9
Operating Facilities & Equipment ................................................................................... 10
Operating/Purchasing/Inventory Management Procedures ..................................... 11
Quality Control................................................................................................................... 11
Customer Service Procedures .......................................................................................... 11
Human Resources .............................................................................................................. 12
Total Costs ........................................................................................................................... 12
Product – Summary ............................................................................................................... 13
Market .......................................................................................................................................... 14
Customer Need & Market Receptiveness........................................................................... 14
Regional Markets ................................................................................................................... 16
Short-term Target Markets ................................................................................................... 17
Primary Short-term Market – Extended Care Facilities ............................................... 18
Secondary Short-term Market – Student Dorms ........................................................... 18
Long-term Target Markets .................................................................................................... 19
Primary Long-term Target Market – Hospitals ............................................................. 19
Secondary Long-term Target Market – Hotels/Motels ................................................ 21
Tertiary Long-term Target Market – Offices .................................................................. 23
Target Markets – Summary .................................................................................................. 24
Marketing Plan ....................................................................................................................... 25
Vision, Goal, and Objectives............................................................................................. 25
Company Resources .......................................................................................................... 26
SWOT Analysis .................................................................................................................. 26
Communications Plan ........................................................................................................... 28
Overview of Energex’ Communication Needs .............................................................. 28
Situation Analysis .............................................................................................................. 29
Theme .................................................................................................................................. 31
Creative Plans ......................................................................................................................... 33
Sponsorship/Endorsement .............................................................................................. 33
Personal Selling .................................................................................................................. 34
Flyers .................................................................................................................................... 35
Strategic Alliances .............................................................................................................. 36
Web-Marketing................................................................................................................... 38
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Do-It-Yourself ..................................................................................................................... 39
Bus Advertisements ........................................................................................................... 41
Pilot Testing ........................................................................................................................ 42
Budget .................................................................................................................................. 44
Customer Acquisition Cost .............................................................................................. 44
Evaluation of Promotional Campaign ............................................................................ 44
Marketing & Communications Plan – Summary .............................................................. 45
Industry ....................................................................................................................................... 45
Industry Definition ................................................................................................................ 45
Industry Attractiveness ......................................................................................................... 46
Sustainable Industry Advantage ......................................................................................... 48
Competitor Analysis .............................................................................................................. 49
InnCom ................................................................................................................................ 50
Energy Eye .......................................................................................................................... 51
Happy Building .................................................................................................................. 51
DimOnOff ........................................................................................................................... 52
Energex Comparison ......................................................................................................... 53
Industry – Summary .............................................................................................................. 54
People........................................................................................................................................... 55
Founder & President.............................................................................................................. 55
Mission, Personal Aspirations, Risk Propensity – ECG ................................................... 56
Connectedness ........................................................................................................................ 57
Ability to Execute ................................................................................................................... 58
Energex Management Team ................................................................................................. 58
Software Manufacturing Relationships .............................................................................. 60
Risks & Mitigation ................................................................................................................. 61
Milestones/Timeline ............................................................................................................. 63
People – Summary ................................................................................................................. 65
Finance ......................................................................................................................................... 66
Price and Revenue Models ................................................................................................... 66
Operating and Cash Cycles .................................................................................................. 66
Financial Projection................................................................................................................ 67
Historical Sales and Unit Break-even Analysis ................................................................. 68
Break-even for the Ontario Market ..................................................................................... 69
Turning Cash Positive ........................................................................................................... 70
Investment Offering............................................................................................................... 71
Finances – Summary .............................................................................................................. 73
Conclusion .................................................................................................................................. 73
Bibliography ............................................................................................................................... 75
Appendix ..................................................................................................................................... 77
Appendix A – Tables ............................................................................................................. 77
Appendix B ........................................................................................................................... 127
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INTRODUCTION
The following document is the four-phase process of creating a complete strategic
business plan for Energex Inc. (Energex), a company based in Richmond, BC. The
business plan focuses on entering the market of Ontario, Canada. Currently, Energex
produces intelligent occupancy sensors that turn off lights and heat when a room is not
being used. The main purpose of the product is to save energy; and, therefore, money.
The four phases of the business plan assessment evaluate the venture idea in terms of
durability, viability, and credibility using the VIQ Analysis1. The analysis is conducted
to find out whether the venture idea is worth pursuing or not.
METHODOLOGY
Mind Power Tools
Energex Consulting Group (ECG), working on this project, crosschecked and analyzed
the information to be presented in a consistent manner. ECG used mind tools to make
the best decisions possible. A decision matrix was used to choose one of the alternatives
by measuring them against relevant criteria. GAP analysis helped ECG to identify if any
of the necessary skills to complete the project were missing. Porter’s five forces is an
analysis used to evaluate the industry and driving forces that impact companies
competing within the industry. PEST-ECC analysis evaluates the company’s external
environment in terms of politics, economics, society, technology, environment, culture,
and competition. SWOT/TOWS analysis evaluates the team members’ strengths to
overcome weaknesses, and future opportunities to overcome threats. Competitor matrix
compares Energex’ competitors across North America using a meaningful set of criteria.
Secondary Research
Secondary research was collected on the internet. The most current, relevant, and valid
information was obtained from reliable sources such as government statistics,
1 Natalia Mainprize, Brent Mainprize, and Kevin Hindle, Venture Intelligence: How Smart Investors and
Entrepreneurs Evaluate New Ventures. (Printed in Canada, 2009), pp. 49-220.
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Datamonitor reports, Toronto Region Research Alliance reports, company annual
reports, business information libraries and databases, and national and international
trade associations.
PRODUCT
Innovation
Innovation is solely based on the concept, novelty, and impact of a product, idea, or
service. The purpose of Energex’ product, an intelligent occupancy sensor, is to reduce
energy waste. These motion sensors also provide customers with the convenience of
automatically adjusting room temperature and light. The product consists of three
parts: an EMU chip (with software), motion sensor, and thermostat.
When the room is not being used, the sensor turns off light and heat. However, the
product has the ability to sense body temperature, so when people are not moving but
remain in the room, the temperature and lights do not turn off. Also, the sensor
operates in a specific range of temperature and does not turn off the heat completely.
The sensor brings the temperature down only to a certain level to save energy, not to
turn off heat completely to waste even more energy when the temperature has to be
brought back up to the normal level.
The concept of motion sensors is not new. However, the innovation aspect of this
product relates to the improvement of thermostat’s functionality. The novelty of
motion sensors is low because the first motion detector was introduced in the 1980s. An
EMU chip, one of the components of the product, was introduced in the late 1980s.
However, Energex is the first company to integrate the motion sensor and EMU chip
that uses special software developed by Energex. This combination of EMU chip,
software, and a motion sensor makes the device unique.
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Intellectual Property Protection
In order to protect Energex’ intellectual property, which is its product, a patent on the
special software used in the EMU chip is being obtained. Unfortunately, obtaining a
patent is a complex issue which takes time and resources to complete; the patent is
pending.
Energex has the advantage over its competitors because, unlike many competitors,
Energex devices can regulate both, heat and light, and detect both, body temperature
and movement. Therefore, this energy solution product meets customer needs and is
superior to the competition. Furthermore, the product will have a unique delivery
strategy and marketing portfolio, which will help Energex increase the gap between
themselves and the competition.
Value Proposition
A value proposition is a message communicating product’s benefits to the customer.
The ultimate customer need is to eliminate the unnecessary energy consumption and to
save money. Energex’ energy solution products have the best advantage to meet
customer need and make energy savings easier than ever before.
From the business point of view, Energex brings its clients many tangible benefits.
Energex’ products save 35%-45% of total energy consumption and result in energy cost
savings. Energex installs the products quickly and at a low cost. In terms of quality,
Energex provides a two-year warranty on all parts and service contracts. Therefore,
product quality is guaranteed. In addition, by using Energex’ wireless communication
systems, clients can improve their working efficiency and reduce unnecessary
personnel cost because all the information can be transferred wirelessly and stored in
one area. Also, an EMU chip can be integrated with other DDC (Direct Digital Controls)
and PMS (Property Management Software) systems.
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One of the intangible benefits of the product is that the fact that it is environmentally
friendly because it saves energy. This benefit helps clients create a better public image.
Energex’ clients can improve the triple bottom line of their businesses by placing more
emphasis on the environmental aspect. Moreover, Energex has the ability and flexibility
to tailor its energy management and information solutions to satisfy different types of
clients.
In conclusion, the overall strategic product orientation is high performance and
functionality. Energex targets customers who value good product quality and excellent
customer service. Energex provides products that satisfy customer needs at fair prices.
Operations Plan & Logistics
Entering Ontario market, the major goal for Energex is to increase its sales volume. The
headquarters and main operations and production will remain in Richmond, British
Columbia. Motion sensors will be manufactured, assembled, and packaged in BC and
then transported to Ontario. The products will be shipped via a broker; Energex will
outsource transportation to a third party. In Ontario, the products will be distributed
the same way as they are in BC, through Energex sales people. Also, the products will
be stored in a leased warehouse, delivered to customers, and installed. For the Do-It-
Yourself tactic (described further), motion sensors will be sent from Energex’
warehouse directly to retail stores (HomeDepot), so deliveries to customers will not be
required.
Energex will use a direct distribution method; they will sell directly to final customers.
Direct distribution will benefit Energex because they will fully control marketing.
Energex will use sales people and sell via the Internet. Also, by selling motion sensors
directly and not using distributors, Energex will reduce the final price for customers.
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Business Location
In order to sell and distribute the products in Ontario, a warehouse is required for the
purposes of storage and office space. The warehouse needs to be between 1,100 and
2,000 square feet in order to efficiently act as an office and a storage center. In addition
to the size requirement, the warehouse must also be fully equipped with a restroom,
water, and power. It must also be able to receive inbound shipments, so a bay door
would be beneficial, but not essential. The warehouse owner must provide insurance.
The ideal location for the warehouse would be at the geographical point where the cost
to distribute the sensor to the customer and the cost of procurement are minimized.
This reduces the overall transportation costs. With this being said, the location must
also be efficient for getting the product to the end customer. The graph 1 demonstrates
the relationship between transportation costs and geographic location, in relation to the
end customer. Based on this information, the most cost efficient location for the
warehouse is Mississauga, because many towns such as Toronto, Kitchener, Hamilton,
and Guelph are located within 60 km of Mississauga. Furthermore, the centrality of this
geographic location allows us to better service a larger geographic range of the target
market (Ontario).
Graph 1. Location Transportation Economics.
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The cost to lease a 2,000 square foot warehouse office in Mississauga is about $2,2002 per
month. Leasing the warehouse is the most favourable option for financing for several
reasons. Firstly, leasing is less capital intensive because it allows the business to expand
faster from lack of long-term debt. Secondly, leasing allows for more time to be focused
on growing the business. Land ownership has many issues and requires much more
work to maintain. Furthermore, leasing is considered an expense on the balance sheet,
which means that it is tax deductable.
Operating Facilities & Equipment
Energex will purchase a desktop computer for its operations in Ontario. An HP Intel
Pentium Processor E2220 2.40GHz Computer with HP 20" LCD Monitor computer will
be purchased at the expense of $799.99 at Future Shop. High processing speed and high
data storage is what matters to Energex. Internet will be an expense of $803.40 per year
when purchasing a “Business Internet Access for Office” from Telus.
Office Furniture will be purchased to accommodate employees and customers in the
Ontario office. Five All-in-one computer desks will be purchased from Addmore Office
Furniture at an expense of $279.993 each. Five chairs will be purchased for $169.994 each
and a files storage will also be purchased for $269.995. The total cost will be $2519.89
before tax.
Energex will buy a car to deliver products to final customers. A SMART car will be
leased at the expense of $183.86 a month following a $1500 down payment. The vehicle
will be limited to 18,000 km per year with a 60-month term. The interest rate will be
6.9%, and the estimated residual value will be $6595.60. The SMART car payments will
2 OLX,
http://mississauga.olx.ca/great-office-unit-and-warehouse-for-lease-iid-20359943, (accessed July 2009).
3 Computer Desk, http://www.addmore.com/product2.asp?pageid=3&ProductID=22, accessed July 24,
2009.
4 Chairs, http://www.addmore.com/product2.asp?pageid=1&ProductID=125, accessed July 24, 2009.
5 Storage, http://www.addmore.com/product2.asp?pageid=5&ProductID=37, accessed July 24, 2009.
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cost the company $2206.32 per year. A custom decal showing the Energex logo will be
placed on both sides of the car for approximately $200.
Operating/Purchasing/Inventory Management Procedures
The inventory method Energex will use in Ontario is First In, First Out (FIFO). FIFO
assumes that the products that are brought in the warehouse first are sold to customers
first. FIFO is also convenient because Canada Revenue Agency does not accept any
other ways of inventory management.
Energex will use the “pull” marketing tactic and “pull” inventory method. The
inventory will be based on customer orders. After a sale is made, products are ordered
from BC, shipped to Ontario, and then installed. Just-in-time inventory will be used;
only the products that are ordered will be manufactured. This inventory method will
reduce inventory storage costs. All inventory items will be ordered based on demand of
the Ontario market. To accommodate the Ontario demand, Richmond facility’s
production capacity may have to be expanded, and more people will have to be hired
for assembly and manufacturing.
Quality Control
Product manufacturing quality control is carried out at the manufacturing location in
Richmond, BC. Once the product is transported to Mississauga, it is then examined to
ensure that it is in proper working order. Once the product is installed, follow-up calls
are made to ensure that the sensor is working properly, and that the customer is
satisfied. If the sensor is not working, then the product is replaced fully, or the customer
is refunded. The number of customer returns will be used as a measure of the level of
product quality and as a measure of customer satisfaction.
Customer Service Procedures
Energex’ customer service level is already established. In Ontario, Energex will
maintain the same level of customer service as well as constantly perfect it. Energex has
a toll-free number where customers can call if they have any inquiries. Also, technical
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support is provided via the Internet; customers can contact Energex’ employees by
sending an e-mail. Energex offers a two-year product warranty and free installation.
Customers can get full refunds for the products if they are not fully satisfied.
Energex measures its success in meeting customer service needs by keeping track of
customer complaints and other feedback about their experience with Energex.
Measurement procedures help Energex strive for the best customer service quality and
continuously improve.
Human Resources
Employees of the Ontario division will be comprised of five members of ECG who will
disband and become employees of Energex. Two members will receive starting salaries
of $20,000 annually with the guarantee for negotiations of profit-sharing, bonuses,
and/or ownership, once the business is operating with positive returns. Five members
will each become salespeople for Energex while still maintaining the further mentioned
roles of marketing, logistics, finances, or operations directors. Three other members will
volunteer their time in exchange for commission, references, and experience. For details
on the roles, backgrounds, and qualifications of management please refer to the
“People” section of the business plan.
Total Costs
The following section summarizes the total funding required to implement the project.
Quotes were collected from vendors for the items required to start the Ontario
operations. First, a warehouse will be leased for $26,400 annually. Second, shipping of
motion sensors from BC to Ontario will be conducted via FedEx Canada. It will take
one to three days to ship the products. An average cost to ship one box is $100 - $160.
There are 24 motion sensors in one box. Based on the demand of 1160 units for the first
year, the products will be shipped 49 times a year. Total cost of transport will be $6,283.
Transportation costs increase every year as the demand increases. Third, products will
be distributed to final customers from a warehouse using a SMART car. The car will be
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leased for $2206.32 per year. Fourth, a computer will cost $799.99. Fifth, the internet
access will cost Energex $803.40 per year. Sixth, the office furniture will total to
$2519.89. Finally, two salaries will be paid to two members of ECG, who will be
implementing the project in Ontario. Salaries will come to $40,000 annually, $20,000
each, in the first year, and will increase thereafter as sales grow. The total cost to
implement Energex operations in Ontario is $79,212.61. Costs incurred only in the first
year are equal to $3,519.88 and include car stickers, a computer, and furniture. Costs
incurred every year are equal to $75,692.72 and include warehouse and car lease
payments, transportation, the internet, and salaries.
Matrix 1. Forecasted Operational Costs, by year.
2010 2011 2012
Warehouse 26,400 26,400 26,400
Transportation 6,283 12,729 19,879
SMART Car 2,206 2,206 2,206
Sticker 200
Computer 799.99
Internet Access 803 803 803
Office Furniture 2,519
Salaries 40,000 40,000 40,000
Total $79,212 $82,138 $89,288
Product – Summary
The product is a motion sensor that reduces energy waste. The product consists of three
parts: an EMU chip with software, a motion sensor, and a thermostat. These motion
sensors also provide customers with the convenience of automatically adjusting room
temperature and light when the room is not being used. The sensor also has the ability
to sense body temperature and movement; so when people are not moving but remain
in the room, the temperature and lights do not turn off. In the first year, $79,212 will be
required to set up operations in Ontario. The “pull” strategy will be used for inventory
management to minimize costs.
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MARKET
Customer Need & Market Receptiveness
Energex currently has three types of customers: businesses, consumers, and
government. These customers are very different; however, they all have a need to save
money by conserving energy used. The ultimate customer need is to eliminate
unnecessary energy consumption and save money.
Business to business (B2B) customers of Energex includes hotels, commercial buildings,
student dorms, apartments/condos owners, and senior/extended care facilities owners.
Firstly, Energex has been serving many hotels across the world for many years. Hotels
are perfect candidates for the technology Energex offers. On average, guests spend less
than 50% of the time in the room, and most do not turn off energy draining devices
such as lights, TV sets, and HVAC (heating, ventilating, and air conditioning) units.
Cost savings for hotels represent 10 – 20% reduction on the total energy bill. Using
Energex’ technology – motion and occupancy sensors – hotels are able to save
significant operating costs.
Secondly, commercial buildings, another B2B customer, represent a good choice of a
market segment for Energex. Research shows that most office workers spend 40% of
the time outside their offices.6 Commercial offices, on average, waste 10 – 15% of their
total energy budget on heating and cooling systems when people do not use them.
Similarly, student dorms, apartments/condos, and senior/extended care facilities waste
much energy on lighting and heating when it is not necessary.
6 Energex, Commercial Buildings, 2009,
http://www.energexinc.com/commercial/main.htm, accesses April 27, 2009.
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Businesses to consumer (B2C) Energex’ customers are owners of apartments, condos,
and houses. In the residences, many living spaces are left unoccupied with light and
heat on. Private residence owners also have a need to save money on their energy costs.
Also, people are concerned about using less energy and saving the planet.
Lastly, another customer segment that Energex serves is business to government (B2G).
This sector consists mostly of social and military housing projects and hospitals.
Governmental organizations are supposedly serving the interests of the public;
therefore, they need to provide the best possible value at the lowest possible cost.
Energex offers technology that reduces HVAC and lighting demand in unoccupied
rooms and spaces. Since most government budgets are tightening, Energex has a perfect
solution for saving money on energy usage.
There are many different substitutes to the technology offered by Energex. Substitutes
represent indirect competition for Energex. First, Energex customers can satisfy their
need to save energy by purchasing energy efficient appliances. These appliances use
less energy than the regular ones; however, energy savings are not significant enough to
make a real difference. Second alternate solution is to install light dimmers, which help
save energy and extend light bulb life. Light dimmers save energy but, as with the
energy efficient appliances, they do not know when a room is unoccupied. Third
alternate solution is ceiling fans, which reduce the need for central air conditioning.
However, ceiling fans are not very effective.
Overall, the current substitutes are not satisfying customer needs. Simple and cheap
energy solutions save only insignificant amounts of energy, whereas complicated
solutions that save much energy are very expensive and difficult to maintain and
install. This gap between the existing products and cheap, effective technology offered
by Energex creates an opportunity for Energex to satisfy the underserved market.
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Generally, two aspects affect the customer need: (1) how urgently customers need to
solve the problem, and (2) how effective are the substitutes. In this case, the problem is
urgent because people need to save money and want to reduce damage to the
environment. Currently available product substitutes provide a limited solution. They
do not fully satisfy the customer need. Customers are underserved, and the market is
waiting with “open arms,” as presented in the graph 2. Therefore, the rating for the
customer need and market receptiveness is high. Energex has an opportunity to serve
the market that is waiting and currently does not have any other decent options. This is
why ECG further conducted a thorough target market analysis.
Graph 2. Market Receptiveness for Energex’ products.
Energex' Market
10
Low Urgency to solve problemHigh
9
8
7
6
5 "Open Arms"
4
3
2
1
0
0 5 10
Effectiveness of Available Substitutes
Superior Moderate Inadequate
Regional Markets
In order to choose a broad target market for Energex, ECG focused on Canada as a
broad audience because of the company’s strategy. The primary goal of Energex is to
establish itself as a strong company in Canada first, and then move on to other markets.
Therefore, Canada is currently the primary objective of Energex.
Looking at the Canadian market, ECG recognizes five potential markets: British
Columbia, Prairies (Alberta, Manitoba, and Saskatchewan), Ontario, Quebec, and
Maritimes (Prince Edward Island, Nova Scotia, New Brunswick, and Newfoundland &
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Labrador). To further determine which market of these five regions to go after, six
criteria were used including energy usage, energy costs, temperature extremes,
environmental expenditure, environmental concern, and population size.
The appropriate weights are assigned to the criteria, energy costs being the most
important and environmental expenditure by province – the least. Based on the decision
matrix analysis conducted (see Appendix A, Tables 1-3), Ontario is the most favourable
region in Canada for Energex. Ontario scores the highest on energy usage, temperature
extremes, and population size. Ontario also has the second highest energy costs and
environmental expenditures in Canada. People of Ontario are concerned with
environmental problems; however, Ontario scored third across Canada on this criterion.
Therefore, based on research, the recommended primary geographic market for
Energex in Canada is Ontario due to high energy costs and usage, extreme summer and
winter temperatures, large population, and people’s concern with environmental issues.
The Ontario regional market was then analysed by industry using several meaningful
criteria (see Appendix A, Table 4). The industries of retirement homes, student dorms,
hospitals, hotels, and large office buildings appeared to have the greatest score when
weighted against the criteria. Therefore, these markets will be examined further as
potential short- and long-term target markets for Energex in Ontario.
Short-term Target Markets
Short-term target markets generate sales more quickly than the long-term ones. For
example, large hospitals or major hotels take long time to secure a contract due to the
extensive amount of bureaucracy surrounding large purchases. These long-term goals
require an extended period of time to derive a large amount of sales. Therefore, several
short-term target markets have been identified. These targets have been chosen for
several reasons (which will be explained below), but, above all, these target markets
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will generate sales with a faster turnover, allowing time and funding for the long-term
target markets to be initiated.
Primary Short-term Market – Extended Care Facilities
The first short-term target market is extended care facilities and retirement homes. This
market segment falls into the broader healthcare sector. These facilities have an energy
intensity level of 1.29 GJ/m2, which is not very high when compared to other types of
healthcare institutions. However, most extended care facilities and retirement homes
are privately owned, which means there is less bureaucracy. Therefore, decisions to buy
and install the product will be fast, resulting in a faster cash flow for Energex. Also,
extended care facilities have large budgets for efficiency retrofits, which they can spend
on Energex’ products. Extended care facilities are frequently used, which means that
people come in and out and forget to turn off lights and heat. These reasons (as
summarised below) make retirement homes a beneficial market for Energex.
Variable Extended Care Facilities
Frequency of Building Use High
Energy Intensity (GJ/M2) 1.29
Energy Efficiency Retrofits High (26% of budget)
% of Building Air-Conditioned High (93%)
Secondary Short-term Market – Student Dorms
The second short-term target market is student dorms. Student dorms have a high level
of energy intensity, large budget for eco-retrofits, and more than half of their total air-
conditioning capacity is used daily. The payback from installing Energex sensors in
student dorms is very high because they have many rooms, where lights and heat are
unknowingly left on with nobody present. In the current operating environment,
universities and colleges have a large incentive to retrofit student dorms. The majority
of schools and educational buildings are taking strategic steps to reduce energy waste.
This represents a great opportunity for Energex (as summarized below). According to
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U101 College Search, there are 70 universities and colleges in Ontario (see Appendix B,
Table 5). From the 70 post secondary institutes, 85% have on-campus housing.
Variable Student Dorms/Housing
Frequency of Building Use High
Energy Intensity (GJ/M2) 1.70 (High)
Energy Efficiency Retrofits High (10% of budget)
% of Building Air-Conditioned High (57%)
Long-term Target Markets
Primary Long-term Target Market – Hospitals
The health care segment encompasses all heath care related facilities such as hospitals,
clinics, institutions, and old age care. As of June 2008, there are a total of 39,103 health
care facilities in Ontario. This accounts for 36.5% of the total health care facilities in
Canada7. In Ontario, hospitals are the single largest provincial government expenditure
(see Appendix A, Tables 6-8). Due to the nature of operations, hospitals have the
highest energy intensity of all publicly funded facilities8.
The most profitable facilities within this broad segment would be medium to large-
sized general hospitals (employs 500+ people), because these facilities are operated in
buildings that are usually very large; and, therefore, have many rooms. Obtaining a
contract to supply a large hospital with Energex’ products would derive a much higher
profit margin when compared to other facilities, such as a small doctor’s office, because
of the high number of rooms that would need to be outfitted.
7 Industry Canada, Health Care and Social Assistance Establishments, http://www.ic.gc.ca/cis-sic/cis-
sic.nsf/IDE/cis62este.html, accessed May 28, 2009.
8 Energy Efficiency Opportunities in Ontario Hospitals,
http://www.oha.com/client/OHA/OHA_LP4W_LND_WebStation.nsf/resources/Energy+Efficiency/$
file/Energy+Efficiency+Opportunities+feb28.pdf, accessed May 28, 2009.
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There are currently 211 hospital sites in Ontario9. Of this number, 155 are operated by
hospital corporations serving the government, and an additional 56 are operated under
an umbrella corporation from the above corporations. Of these 211 hospitals, 153 are
considered to be “large” facilities. The number of large hospitals in Ontario makes up
40% of Canada’s total large hospitals (see Appendix A, Table 9).
There is a great need for large hospitals to become more energy efficient as per the
passing of bill C-21: The Energy Responsibility Act, 2005, which created provincial
legislation “encouraging” public sector services (hospitals, universities, and ministries)
to lead the way in becoming energy efficient through the acquisition of energy saving
goods and services that have an economic payback. Moreover, a recent study of several
large Ontario hospitals found that utility costs represented approximately 47% of their
total operating expenditure10. Electricity costs represent about 50% of the total utility
costs; therefore, electricity costs are approximately 27.3% of the total operating
expenditure. In 2005, Ontario hospitals received $12.27 billion for their operating
budget11. The average operating expenditure on utilities varies depending on the type
of the hospital. Teaching hospitals spend $8,037,000 per year, medium/large hospitals –
$2,472,000 per year, continuing care/rehab/psych hospitals – $1,121,000 per year, and
small hospitals only spend $609,000 per year on utilities.
Based on this information, large- and medium-sized hospitals and teaching hospitals
have the greatest level of need for Energex’ products because they satisfy the need to
become more energy efficient and to reduce their current operating costs. There are six
teaching hospitals in Ontario. The teaching hospitals are all large hospitals. They are
9 Ontario Ministry of Health and Long-term Care, Hospitals,
http://www.health.gov.on.ca/english/public/contact/hosp/hosp_mn.html, accessed May 28, 2009.
10 Jim Jefferson, Energy Efficiency Opportunities in Ontario Hospitals, Ontario Power Authority 2006.
http://www.oha.com/client/OHA/OHA_LP4W_LND_WebStation.nsf/resources/Energy+Efficiency/$
file/Energy+Efficiency+Opportunities+feb28.pdf, Accessed may 2009.
11 Ibid
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primarily located in Southern Ontario. The specific locations are as follows: London,
Hamilton, Toronto, Kingston, and Ottawa12 (see Appendix A, Table 10).
Secondary Long-term Target Market – Hotels/Motels
According to Industry Canada, hotels/motels are defined under the accommodation
and food services industry. This sector includes establishments that provide short-term
lodging and complementary services to travelers/vacationers. These establishments
comprise of hotels, motor hotels, resorts, motels, casino hotels, bed and breakfast
accommodation, housekeeping cottages and cabins, recreational vehicle parks and
campgrounds, hunting and fishing camps, and various types of recreational and
adventure camps.13
The analyzed information shows that the Ontario hotel/motel industry is favourable for
Energex to target. Firstly, Ontario has the highest number of micro-, small-, medium-,
and large-sized accommodation and food services businesses in Canada, in terms of
number of employees. Secondly, Ontario has the highest percentage of accommodation
and food services employers in Canada. The total number of accommodation and food
services in Ontario is 39,120 firms. Of this total, there are 1,356 hotels/motels in Ontario
(see Appendix A, Tables 11-12). This number represents about 3.5% of the total
accommodation and food services market in Ontario. Therefore, the statistics show that
Energex has a large market to target.
The total annual capital investment made by firms in the accommodation and food
services industry was $2.8 million in 2007 (see Appendix A, Table 13). For example, in
2006, Best Western Hotels alone had a budget of $32 million for furniture and
12 Council of Academic Hospitals of Ontario, About Us, http://www.caho-
hospitals.com/about_caho.aspx, accessed May 29, 2009.
13 Industry Canada, Canadian Industry Statistics (CIS), 2009, Definition
Accommodation and Food Services (NAICS 72), http://www.ic.gc.ca/cis-sic/cis-sic.nsf/IDE/cis72defe.html,
accessed on May 29, 2009.
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equipment, including fixtures.14 This information proves that Ontario hotels/motels can
afford to purchase Energex’ motion sensors. The hotel/motel industry is attractive and
is expected to grow, which is favourable for Energex.
Most Ontario hotels/motels are located in Niagara Falls and Toronto, with 110 and 114
establishments, respectively (see Appendix A, Tables 14-15), because both cities attract a
large number of domestic and international tourists. There are also eight other cities:
Algonquin, Kingston, London, Mississauga, Ottawa, Sudbury, Wasaga Beach, and
Windsor, which have more than 20 established hotels/motels each. The hotel/motel
industry in Ontario is moderately competitive. Usually, establishments in this sector
compete on the basis of differentiation of services offered. Hotels/motels use very much
energy in their day-to-day operations. Therefore, hotels/motels have a high demand for
energy conservation products because many of them are trying to pursue a new
“green” trend in business and differentiate themselves as more sustainable enterprises.
According to the hotel-industry learnhub, the classification of hotels is based on: (1)
location, (2) size of property, (3) level of service, (4) length of stay, (5) based on themes,
and (6) based lifestyles.15 The hotel industry is a vast market, and many hotels do not fit
into one classification (see Appendix A, Tables 16-19). Analysis shows that hotels
“based on lifestyles and location” represent a good opportunity for Energex to make a
profit. For example, Toronto is known as the business centre of Ontario. Therefore,
there are many hotels/motels that target travelling business professionals.
Hotel/motels that fall under the “based on location” classification are ideal for Energex
because there are many hotels/motels under this classification in Ontario (see
Appendix A, Tables 20-21). Thus, hotels “based on lifestyles and location” are chosen as
a secondary target market for Energex because there is a colossal profit opportunity.
14 Best Western Hotels, 2009, Annual Report, 2006, Pdf file, accessed on May 30, 2009.
15 Hotel-industry.learnhub.com, 2009, Classification of Hotels, http://hotel-
industry.learnhub.com/lesson/8842-classification-of-hotels, accessed on May 21, 2009.
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Tertiary Long-term Target Market – Offices
The tertiary target market ECG researched is the office buildings in Ontario. According
to Industry Canada, this industry is classified as finance, insurance, real estate, business
and government service office buildings16.
According to the 2007 report, Commercial and Institutional Consumption of Energy
Survey, by Natural Resources Canada17, the office sector is a good market for Energex
because it consumes the greatest amount of energy, 13% of total consumption in
Canada. Particularly in Ontario, offices have the greatest number of establishments,
156,693, or 38% of all commercial and institutional establishments (see Appendix A,
Table 22). Energy intensity for Ontario offices is 1.54 GJ/m2, which is relatively high
compared to other sectors. There are incentives for office buildings to save energy.
Average year of construction of office buildings in Ontario is 197418. Compared to new
buildings, which tend to be built to increasingly rigorous standards and equipped with
energy-efficient technology and materials, older establishments must undergo extensive
renovations to improve their energy performance. Older establishments are the least
energy efficient, which means that potential energy savings are greater than for new
buildings.
According to Statistics Canada19, in Ontario, in 2008, investment in non-residential
building construction (including offices) increased 3.1% to $3.8 billion. Strongest growth
(in dollars) was in Toronto, where investment rose 4.2% to $1.9 billion. It was followed
16 Industry Canada Web site, The North American Industry Classification System, Services-Producing
Industries,
http://www.ic.gc.ca/eic/site/cis-sic.nsf/eng/h_00008.html, accessed on June 1, 2009.
17 Natural Resources Canada Web site, Commercial and Institutional Consumption of Energy Survey,
Summary Report June 2007, http://oee.rncan.gc.ca/publications/statistics/cices06/pdf/cices06.pdf,
accessed June 1, 2009.
18 Ibid.
19 Statistics Canada, Investment in non-residential building construction,
http://www.statcan.gc.ca/daily-quotidien/080414/dq080414a-eng.htm, accessed June 3, 2009.
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by Hamilton, where investment increased 24.5% to $166 million. This means that the
chosen segment has budget to spend on motion sensors offered by Energex. Also,
Toronto has the highest number of office establishments in Ontario, 70,816, followed by
Hamilton at 7,571, Kitchener at 5,230, Oshawa at 2,655, and Guelph at 1616 (see
Appendix A, Tables 23-27). Therefore, Energex should focus on Toronto, Hamilton, and
Kitchener.
However, in 2009, due to the global economic recession, investment in office building
construction fell across Canada. One of the largest drops was in Toronto, mainly
because of the decline in commercial construction projects. Investment in the
construction of commercial buildings fell by 3%, from $1,967 million to $1,921 million.
Ontario had the sharpest decline in dollars, with decreased investment in every
category of industrial building, including offices. Therefore, this market segment is
chosen only as tertiary target market, in case the demand increases in the future.
Overall, offices in Ontario are a good market for Energex, but it is difficult to reach. The
owners of office buildings are not interested in saving energy costs because they do not
pay for it. On the other hand, people, who pay for energy and would be interested in
energy savings, are companies renting office space from building owners. However,
office renters are very difficult to solicit because they are scattered and fragmented. For
this reason, and because the investment in office buildings has been declining in
Toronto, office buildings in Ontario is considered a tertiary market for Energex as it
does not have as much potential in terms of revenue as the primary and secondary
target markets do.
Target Markets – Summary
Based on the secondary market research conducted, Ontario appears to be the most
favourable regional market for Energex to enter. Within Ontario, five different
industries were chosen. Two of those industries will be pursued by Energex in order to
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get quick profit: student dorms and extended care facilities. The other three industries
will be pursued to make a profit in the long-term because these markets require long
development: hospitals, hotels/motels, and offices. All target markets selected for
Energex within Ontario are separated into short-term markets, which will derive sales
fast, and long-term target markets, which will derive a larger amount of sales slower.
The combination of both types of target markets enables large future growth, while
sustaining the operational cash flows requirements. The target markets are as follows:
Short -Term Long-Term
Extended Care Facilities and Retirement Medium/Large Hospitals and Teaching
Homes Hospitals
Student Dorms “Lifestyles and location” based
Hotels/Motels
Large Office Buildings
Marketing Plan
Vision, Goals, and Objectives
The vision of the project is for Energex to become the number one choice for intelligent
occupancy sensors in Ontario by increasing its brand exposure. After successful
implementation of the marketing plan, Energex will become the leading provider of
energy solutions in Ontario in terms of the triple bottom line: market share, community
relations, and the environment.
The first long-term goal of this project is to increase Energex’ sales volume. The Ontario
market will generate minimum $1 million in sales by 2012 (year three from the start of
operations). The second goal is to build brand name awareness among the target
audience in Ontario. The marketing plan outlined further provides guidance which
marketing tactics to use, in order for Energex to reach the target sales volume in
Ontario.
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Usually, specific objectives help understand how to achieve the desired goal. Energex’
main objective in Ontario is to penetrate its identified short-term target markets
(student dorms and extended care facilities) within one year from the start of operations
and long-term target markets (hospitals, hotels, and offices) within three years from the
start of operations.
Company Resources
Energex is a company with 17 years of industry experience. The main focus is to design
energy solutions to help customers reduce energy waste and improve their bottom line.
Energex generic competitive strategy is identified, according to M. Porter’s model, as
broad differentiation. Energex’ target market is broad (business, residential, and
government sectors), and the company’s competitive advantage is differentiation –
Energex provides quality products and excellent customer service. Also, Energex cannot
be a low-cost provider because R&D costs are very high and economies of scale are
difficult to achieve at this stage. However, the reader should note that the industry is
very new; therefore, competitors have not found their exact places yet. Energex’
strategy may change when the industry boundaries define themselves.
In terms of the company’s value chain, Energex Ontario will place the main emphasis
on marketing, outbound logistics, operations, R&D, and customer service. Marketing
resources will include the marketing plan with innovative ideas to reach target markets
in Ontario. Outbound logistics and customer service will be maintained to the same
standards as they are right now. Operations and R&D will still take place in Richmond,
BC. Knowledgeable staff and latest technology will ensure that company’s potential is
fully utilized.
SWOT Analysis
The first part of the SWOT Analysis is Energex’ internal strengths. Energex’ main
strength, compared to competitors, is that Energex’ motion sensor regulates both, heat
and light, and senses both, motion and body heat. Energex’ products are Energy Star
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certified, which means they are energy efficient. In addition, Energex offers free
installation of its products as well as a two-year warranty.
Another strength of Energex is that it is a dynamic and flexible company headquartered
in Canada. This is beneficial for Energex because Canadians support local companies.
Moreover, Energex has an established reputation amongst its customer and supplier
base. There are good testimonials from customers and suppliers, which will make it
easy for Energex to get referrals. Almost all of Energex’ 12 suppliers are located in BC.
Therefore, the inventory can be kept at a minimum because the parts can be delivered
quickly. Overall, Energex receives good publicity in the media because of its innovative
products and because of its community involvement, such as supporting local charities
and events.
Second, the analysis examines company’s internal weaknesses. The major weakness of
Energex is the fact that its competitive advantage is not sustainable. There is no patent
for the product yet, which means that any competitor can copy the technology. Also,
Energex is a small company with small production capacity, which may not be enough
to satisfy the Ontario demand. Another weak side of Energex is marketing; it is
ineffective and not strategic. Similarly to unsuccessful marketing attempts, company’s
operations management is poor. There are no measurements in place to identify exact
product manufacturing and assembly costs.
Third, the external opportunities open to Energex are examined. Energex has an
opportunity to expand its technology by adding humidity control capability. It would
be a defensive strategy since one of Energex’ competitors, InnCom, already has this
technology. Also, Energex can add more certifications to increase its credibility in the
marketplace. Similarly, for the purpose of becoming a more trustworthy company,
Energex can create strategic alliances. For instance, an alliance with a competitor to get
certifications will be beneficial to both parties because it will be more cost efficient.
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A very attractive opportunity for Energex exists in Ontario because the public sector is
now encouraged to become more energy efficient. These recent government regulations
will greatly benefit Energex in terms of added sales. Also, increasing energy costs,
energy consumption rates, and environmental awareness indicate that the market will
be receptive to Energex’ products.
More opportunities for Energex can be found by entering a new market. For example,
Energex can enter the Do-It-Yourself segment and use a “push” strategy by selling
simplified sensors at HomeDepot for customers to install in their homes (this tactic is
described further). In terms of possible opportunities/exit strategies for Energex,
merger/acquisition by another company is the most likely.
Last, the SWOT Analysis describes external threats to the company. The biggest threat
is that competitors will catch up, imitate, and improve Energex’ products. Competitors
are expanding to Energex’ markets and stealing its market share. Also, current recession
may be a reason for lower than expected sales, since the companies in the identified
target markets have less disposable income.
Communications Plan
Overview of Energex’ Communication Needs
Profitable returns on investments evolve from well-planned communication programs.
To successfully create effective communication plans, the company’s current situation,
the decision to be made, and the identification of the problem should be addressed.
Energex currently has no indication of rapidly increasing sales. Therefore, an effective
integrated marketing communication campaign to increase sales needs to be
implemented. Also, direct competitors of Energex (InnCom, Energy Eye, DimOnOff,
and Happy Building) have presence in Ontario with similar products, which decreases
Energex’ competitive advantage.
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Situation Analysis
The 5C’s of Marketing is a useful tool to properly analyze a company’s current
situation. According to 12manage.com, understanding the C’s of Marketing is essential
to developing a successful marketing plan.20 The analysis includes five principles: (1)
company skills, (2) customer needs, (3) competition, (4) collaborators, and (5) context.
First, in terms of company skills, Energex employs a differentiation competitive strategy
seeking a broad buyer segment (student dorms, extended care facilities, hospitals,
hotels, and large office buildings). Also, Energex’ new marketing strategy introduces a
Do-It-Yourself product (selling Energex’ motion sensors in retail stores). Introduction of
the new product line will amplify differentiation strategy of Energex and its core
competence. And, currently, no competitor sells similar products in retail stores for
public to self-install.
Second, in terms of customer needs, the customer satisfaction model is used. This
model looks at six categories of quality attributes: (1) basic factors, (2) excitement
factors, (3) performance factors, (4) indifferent attributes, (5) questionable attributes,
and (6) reverse attributes. Energex customers take for granted a product that can
regulate light and temperature because they have other substitutes. This is considered
to be a minimum requirement because, if not fulfilled, customers will still be
unsatisfied. However, since Energex’ motion sensors automatically regulate both,
temperature and light, it is seen as an excitement factor. Additionally, Energex provides
customers with wireless communications that work with the motion sensor to help
businesses track energy consumption more effectively. This factor surprises most
customers and generates delight. In terms of performance factors, Energex’ motion
sensors save 35% to 40% on energy consumption. For example, a hotel that has 175
20
12manage.com 5 C’s of Marketing Strategy.
http://www.12manage.com/description_5_cs_marketing_strategy.html. Retrieved July 19, 2009.
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rooms or a facility with 12,000 m2 of serviceable floor area can save approximately
$102,200 annually.21 This is directly connected to customers’ explicit needs and desires.
In addition, in terms of indifferent attributes, Energex buyers do not care what color the
products come in. The main concern of customers is how much money they will save.
However, a questionable attribute of customers is if the motion sensors will actually
save 35% - 40% on energy consumption; and if so, how much energy will they save in
dollars. Since most similar products only save 20% on energy consumption, this is a
reverse factor expected by customers.
Third, in terms of competition, Energex is facing four major competitors in North
America: InnCom, Energy Eye, DimOnOff, and Happy Building (the competitor
analysis is outlined further). Energex and InnCom are the only two companies in the
market that offer products that regulate light, heat, and air-conditioning. To outperform
competitors, Energex needs to use new marketing tactics, such as web-marketing and
Do-It-Yourself.
Fourth, in terms of collaborations, Energex will join with other organizations to
accomplish common objectives through methods, which motivate each partner. To
identify potential strategic partners, ECG conducted a strategic alliance process
examination and identified two feasible alliances: with Green Screen Toronto (Green
Screen) and with Toronto Region Sustainability Program (TRSP).
Finally, context refers to the external environment analysis, or PEST-ECC analysis,
which ECG conducted (see Appendix A, Table 28). Overall, Energex needs to protect its
intellectual property and to continuously innovate in order to prevent competitors from
imitating its products.
21 Natural Resources Canada. Saving Energy Dollars. http://dsp-psd.tpsgc.gc.ca/Collection/M144-10-
2003E.pdf. Retrieved July 20, 2009.
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Target Market of Energex
Marketing vehicles such as sponsorships, personal selling, strategic alliances, flyers,
web-marketing, Do-It-Yourself, bus ads, and pilot testing will target both short-term
and long-term buyer segments identified earlier in the report. These marketing tactics
are carefully selected to create a perfect fit with the target markets. This fit will allow
Energex become effective and reach the largest portion of the target markets possible.
The highest rate of response possible will generate more revenues for the company.
Theme
The theme of Energex’ integrated marketing communication (IMC) campaign is
encouragement of the target segments to purchase Energex’ products, stimulate
purchases through referrals, and improve customer relationship management. The
purpose of the IMC plan is to implement an aggressive promotional campaign. All
promotional tools are linked together to work in harmony. By employing an effective
promotional campaign, Energex will create a positive corporate image and gain the
identified buyer segments’ attention and acceptance.
There are five levels of integration including: (1) horizontal, (2) vertical, (3) internal, (4)
external, and (5) data integration. Energex’ promotional campaign, Innovative Energy
Solutions – For a Better Tomorrow, will use a horizontal, vertical, data, and external
integration.
First, the campaign will use a horizontal integration by ensuring that the integration of
all strategies is consistent with the marketing mix and business functions. For example,
production, finance, distribution, and communication departments will work together
to ensure that all messages exposed to customers are consistent.
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Second, the campaign will exploit vertical integration through its marketing and
communications goals. For example, marketing and communication objectives will
support the corporate objectives and vision.
Third, data integration will also be used through sales, direct mail, and advertising
departments. For example, the collection of data from Energex’ open-information
system requires marketing information, which collects and shares relevant data across
the departments. Energex’ sales, direct mail, and advertising departments will benefit
more on the data collected from the open-source system, which will make marketing to
buyer segments easier.
Finally, external integration will also be used through the strategic alliances and
sponsorships. For example, Energex will only partner with companies, who amplify
Energex’ message or ideal customer perception. As a result, Energex will deliver a
cohesive and consistent message to its target markets.
Description of Complementary Strategic Options
Energex’ IMC campaign, Innovative Energy Solutions – For a Better Tomorrow,
includes a variety of marketing tactics, which refer to the plans and methods used to
achieve short- and long-term objectives. The campaign includes the following
marketing vehicles: sponsorship, personal selling, flyers, strategic alliances, web
marketing, Do-It-Yourself, bus advertisements, and pilot testing.
Since Energex will be entering a new market, the company needs to increase brand
name awareness and associate with credible organizations. The marketing vehicles
integrated in the campaign will accomplish Energex’ long-term goal of increasing sales.
The first objective of the promotional campaign is to generate revenues of $348,000 by
year one. The second objective is to communicate a favourable corporate image through
the implementation of marketing vehicles to accomplish marketing goals.
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Creative Plans
This section of the communications plan describes each strategic approach used for the
campaign in detail. Under each strategic approach, the following will be addressed: (1)
the objective(s) of each strategic approach, (2) explanation of the marketing strategy, (3)
the creative execution, (4) the time of the marketing vehicles’ implementation, (5)
estimated costs of each marketing strategy, and (6) the reach and frequency of
marketing strategies. Please note that the implementation and estimated costs of each
marketing strategy are provided at the end of the creative plan.
Sponsorship/Endorsement
The first objective of the sponsorship strategy is to increase brand name awareness to
achieve the targeted market shares under each buyer segment (see Appendix A, Table
29). The second objective is to enhance brand image to induce buyer purchases. The
third objective is to amplify brand recognition by associating with familiar
organizations. These objectives will be implemented in the first year of operations.
Explanation of Marketing Strategy
Sponsorship is the financial or in-kind support of an activity, used primarily to reach
specified business goals22. It provides opportunities for companies to broaden their
competitive advantage by increasing brand recognition, image, and prestige; and by
attracting the target market. It is considered a qualitative medium that helps businesses
reach specifically targeted niche markets. In addition, sponsorship is a powerful
complement to other marketing programs. Sponsorship will ultimately create a strong
competitiveness and drive the sales to reach company’s financial objectives.
Creative Execution
By sponsoring Toronto Environmental Alliance (TEA) or other environmental and
sustainable organizations, Energex will receive many benefits. The most obvious benefit
22 Friedman Susan, “Sponsorship: A key to powerful marketing”, About.com,
http://marketing.about.com/od/eventandseminarmarketing/a/sponsorship.htm, accessed July 19,
2009.
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is creating positive publicity and visibility of the company, resulting in enhanced
company image and positive customer attitudes. TEA is an organization dedicated to
finding solutions to urban environmental problems of the city of Toronto. If Energex
donates $50 per month towards TEA’s initiatives, it will have a foot in the door with the
Ontario government. By providing a monthly donation, Energex will be featured as a
sponsor on TEA’s website, directing customers to Energex online medium.
Reach and Frequency of Strategy
Reach is the measure of the percentage of people in the target market, who are exposed
to Energex products. According to toronto.ca, the population of Toronto is 2.48 million
people, and the total population of the Greater Toronto Area (GTA) is 5.5 million
people.23 TEA’s website traffic on February 21, 2001 was 2,512,421.24 This represents the
average daily visits for the past three months. Therefore, the potential reach of audience
in the GTA, by having Energex featured on TEA’s website, is 45.7% of the market,
which will be exposed to energexinc.com (see Appendix A, Table 30). Frequency is the
measure of how many times the average person in the target market will be exposed to
Energex’ website. According to alexa.com, TEA’s website is viewed three times per
user; hence, Energex has the potential to reach the frequency of three times per user.
Personal Selling
The first objective for the personal selling strategy is to communicate promotion
incentives, unique product attributes, and benefits to buyer segments to reach targeted
quotas. The second objective is to establish strategic alliances with organizations, who
will amplify Energex’ competitive strategy of differentiation. The third objective is to
attract buyer segments to generate $1,101,000 in net sales by the third year of operations
in the Ontario market.
23 Toronto.ca. (2009). Living in Toronto. http://www.toronto.ca/toronto_facts/diversity.htm. Retrieved
July 23, 2009.
24 Alexa.com. (2009). Siteinfo.Torontoenvironment.org.
http://www.alexa.com/siteinfo/torontoenvironment.org. Retrieved July 25, 2009.
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Explanation of Marketing Strategy
Personal selling involves face-to-face contact between Energex and the potential buyer.
Energex will hire members of ECG to be in charge of the Ontario market. The
employees will report to headquarters in Richmond, BC and carry-out assigned
responsibilities. In addition, the sales representatives will conduct presentations to
obtain new clientele.
Creative Execution
Sales representatives will be given monthly sale quotas by headquarters. Sales
representatives will be responsible to create a work schedule that will allow them to
meet sale quotas. Sales representatives will also be responsible to receive the products
and make orders as necessary. Sales representatives will be the face of the company in
the Ontario market. To encourage sales employees to meet goals, commissions and
bonuses will be given when monthly quotas are achieved.
Reach and Frequency
The number of people in the target market, who will be exposed to this medium,
depends on how many meetings sales representatives can hold per day. The frequency
of how many times the average person in the target market is approached by sales
representatives prior to purchasing is minimum three. After making the sale, sales
representatives should conduct follow-ups as frequently as needed to provide
exceptional customer service and address any questions or concerns.
Flyers
The first objective of the flyer marketing vehicle is to induce action to visit Energex’
website to find out more about product benefits and the company. The second objective
is to build interest in products by referring potential customers to the website to
calculate their savings in dollars. The third objective is to stimulate product purchases
by comparing current energy costs and potential savings.
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Explanation of Marketing Strategy
This marketing vehicle consists of developing advertising pieces, such as the ones seen
in Appendix A, Tables 31-32. These pieces will be mailed to consumers in envelopes
together with their electricity bills. The flyers will clearly illustrate the savings that can
be achieved by using Energex products, which will be reinforced by the bill
highlighting current monthly expenses. Energex will look like the most logical solution
for energy savings when read alongside an energy bill.
Creative Execution
In order to get Ontario Hydro 1 to allow Energex insert flyers with hydro bills, Energex
needs to offer them some value. From each Energex product purchased and used,
Ontario Hydro will receive 3% of total customer’s energy savings in dollars.
Reach and Frequency
The flyers will be distributed to 1,000 hotels (or 73.7% of total) and 4,000 extended care
facilities (or 86% of total) in Ontario. Customers will be reached at a cost of $0.75 per
flyer. The total frequency or how many times manager(s) will read the flyer is estimated
to be three times. On the other hand, people could also throw the flyer away once they
open their hydro bill, which will increase frequency as others read it. Hopefully,
managers will take the time to read the flyer and will visit Energex’ website to calculate
their potential dollar savings.
Strategic Alliances
The first objective of forming strategic alliances is to develop positive customer
perceptions by showing Energex’ commitment to corporate social responsibility and the
environment. The second objective is to enhance brand image by joining sustainable
and environmental associations, which connect with consumer lifestyles. The third
objective is to increase sales to potential buyers.
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Explanation of Marketing Strategy
According to Small Business Notes.com, strategic alliances are one of the fastest
growing trends today.25 For a small business like Energex, strategic alliances are a way
to work with other organizations towards a common goal, while not losing their
individuality. Strategic alliances will be formed with “green” consultants located in
Toronto, such as Green Screen Toronto (Green Screen) and Toronto Region
Sustainability Program (TRSP). TRSP is a consulting firm located in Toronto, which
provides small- and medium-sized businesses with pollution and energy efficiency
solutions. Both of these “green” consultants have the Ontario government as their
sponsor. Therefore, by partnering with Green Screen or TRSP, Energex will not only
increase brand name awareness amongst buyer segments, but will also be recognized
by the provincial government.
Creative Execution
The strategic alliance will be formed for the first year of operations in Ontario. The
strategic alliance will be based on the exchange of services. For example, Energex can
provide TRSP with its products in exchange for free advertising. Additionally, TRSP
will be able to recommend Energex products to its customers.
Reach and Frequency
As mentioned above, the population of the Greater Toronto Area is 5.5 million people.26
TRSP’s website traffic during a three month period is 3,453,478.27 Therefore, the
potential reach of audience in GTA is 62.79%, if Energex is featured on TRSP’s website.
According to alexa.com, TRSP’s website is viewed one time per user; hence, Energex
has the potential to reach the frequency of one time per user.
25 Smallbusinessnotes.com. (2009). Strategic Alliances.
http://www.smallbusinessnotes.com/operating/leadership/strategicalliances.html. Retrieved July 18,
2009.
26 Toronto.ca. (2009). Living in Toronto. http://www.toronto.ca/toronto_facts/diversity.htm. Retrieved
July 23, 2009.
27 Alexa.com. (2009). Siteinfo.Torontoenvironment.org. http://www.alexa.com/siteinfo/oceta.on.ca.
Retrieved July 25, 2009.
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Web-Marketing
The first objective of web-marketing is to implement a brand loyalty program, all
proceeds of which will be donated to charity. The second objective is to increase
average website traffic for the first year to 1,800,000 people and gain 18,000 new
members. The third objective is to induce product purchases by providing website links
of existing customers of Energex.
Explanation of Marketing Strategy
Web-marketing tactics will be employed to increase brand name awareness, create other
sources of income, and induce buyer purchases. This tool is very cost effective and is
useful in reaching a mass number of potential customers.
Creative Execution
It is recommended that Energex develops a forum (open-source information system) to
increase amount of people browsing Energex website. The forum will provide
customers with blogs and information about the environment, sustainability, and
saving energy. Customers will be able to comment on the blogs, which can be easily
created with no additional costs. To build brand name awareness through social
networks, Energex can create a Twitter account, Facebook group, and LinkedIn account.
Another website tool that Energex would benefit from is tracking website clicks and
views. This can be done at no additional costs through alexa.com. Energex could also
develop an online calculator to help customers calculate energy savings in dollars.
These tactics will make Energex website more interactive.
Additionally, to solidify customer relationships, it is recommended that Energex creates
loyalty programs. For example, Energex will create a loyalty program called the Motion
Sensor Package Value and charge people to become members on the company’s
website. The Motion Sensor Package Value will include a draw, where customers will
be given the opportunity to win a free motion sensor for a small donation. All proceeds
will be donated to children’s organizations. This draw will also increase website visits.
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Energex will also provide digital downloads of useful information on their website.
Charging customers for the information will create a new revenue stream for Energex.
Reach and Frequency of Strategy
Currently, Energex’ website traffic is very poor. Alexa.com does not have any record of
Energex’ reach or traffic view because Energex’ website clicks are not in the top 100,000
rankings. Therefore, through the web-marketing tactics, Energex will increase website
clicks and views. With the support of other marketing mediums, it is realistic to
increase website views by 1,800,000 within the first year of operations. The ideal
frequency per user is two times per day.
Do-It-Yourself
The first objective of the Do-It-Yourself marketing strategy is to introduce a line
extension to a new market sector in order to achieve $1,000,000 in sales by the year
three. The second objective is to increase brand name awareness by having Energex’
logo displayed on product packages.
Explanation of Marketing Strategy
The Do-It-Yourself strategy will be a new revenue stream for Energex. It will first start
in Ontario with a further possibility to expand to different markets. The Do-It-Yourself
strategy involves simplifying the product and selling it at retail stores (HomeDepot) to
individual consumers, who will install the products themselves. For this to work,
Energex will have to write detailed installation manuals, so that residential customers
can install motion sensors easily.
Introducing modified Energex products at retail stores will create a new market. The
target market will consist of individual home owners, with average/high annual
income and basic handyman skills. These individual customers reached through
HomeDepot will also help Energex reach its identified target markets (student dorms,
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extended care facilities, hospitals, hotels, and offices). HomeDepot customers will
spread the word of mouth marketing for Energex.
Creative Execution
Energex will sell its products to HomeDepot, a hardware big-box retailer that attracts
skilled customers. These customers prefer to build things with their hands. HomeDepot
will resell Energex’ motion sensors to customers. Energex will earn a portion of the
profit margin and give a portion to HomeDepot. In terms of distribution, Energex will
assemble, package, and ship the products. The package of the product will have the
company’s logo and EnergeryStar certification logo. HomeDepot will be responsible for
ordering, storing, and selling the products. The Do-It-Yourself marketing vehicle will
increase Energex brand awareness. Product recognition will increase, as more people
will see Energex products at the retail store locations.
Based on primary research (observations at HomeDepot), there are currently no
products available that are similar to Energex. These retailers sell thermostats, regular
and programmable, but they do no sell motion sensors that regulate heat and light. To
capture this opportunity, Energex should enter the Do-It-Yourself market segment and
enjoy the benefits of being a first mover.
In terms of costs, the Do-It-Yourself tactic will be low-cost compared to other proposed
tactics. First, it will decrease costs of production because products will be simpler and
easier to assemble. Second, less parts and components will be required to manufacture
the products; therefore, procurement costs will also decrease. Third, costs of selling will
decrease because sales people will not be required to sell products to final customers,
HomeDepot will be in charge of that. And Energex will not have to install the sensors,
customers will do it themselves. However, Energex will have to pay for printing of the
installation instructions and packaging. The estimated printing cost, for a two-sided
black and white paper, is $0.20 per page. For instance, HomeDepot has a total of 26
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stores in Ontario; 100 units are sold per store. Therefore, the cost of printing of
installation instructions is estimated to be $520, or ($0.20*100)* 26.
Reach and Frequency
Overall, the Do-It-Yourself strategy is a new field for Energex to compete in; therefore,
it is risky. However, this opportunity opens up a completely new market for Energex, a
market, where there is no competitors yet. If Energex becomes a first company to this
market, they will be able to significantly boost their sales revenue. Moreover, the reach
and frequency of the target market will be in large numbers due to the retailer’s
popularity.
Bus Advertisements
The first objective of bus advertisements is to refer customers to the website to increase
website traffic. The second objective is to increase brand name awareness by reaching a
large amount of people. The third objective is to communicate a favourable corporate
image through intangible features that induce buyer purchases. Bus ads will be
implemented during June of 2010.
Explanation of Marketing Strategy
Transit advertising is a type of promotional tactic that can help company to reach
everyone on the street almost everywhere. By placing print ads on buses, companies
send their messages to audiences of all ages, backgrounds, and incomes28. This tactic
embeds company images into people’s daily lives. Bus ads may not be able to drive
large sales instantly, but its large, colourful, innovative design can exclusively improve
brand recognition for a company, since the ads are difficult to ignore. In addition,
transit advertising offers mobility and flexibility of ad size and location.
Creative Execution
A bus ad for Energex will be created by Lamar, a bus advertising company in Toronto.
The total cost to run the ads on 18 buses in Toronto is $9,450. The ads will be run for
28 Kobliski J. Kathy, “The advantage of transit advertising”, Entrepreneur.com,
http://www.entrepreneur.com/advertising/howtoguides/article76826.html, accessed July 19, 2009.
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four weeks in June of 2010 only. This tactic mainly targets the residential DIY segment,
or people who shop at HomeDepot and install product themselves.
Reach and Frequency
According to Lamar, 87.2% of the Toronto’s target market will be reached through bus
ads. The bus ad will be displayed on 18 different buses during four weeks. The
frequency of the average person in the target market exposed to the bus ad is 9.1 times.
The total number of people reached will be 377,204. The average gross impressions will
be 3,425,012 people in a month.
Pilot Testing
The first objective of pilot testing is to induce customer purchases within the
government segment through referrals. The second objective is to increase brand name
awareness and sales.
Explanation of Marketing Strategy
Pilot testing is the activity of having the product installed and used in a business for a
set period in order to build credibility and prove product capabilities. By utilizing pilot
testing in particular industries, the pilot test can be used as a referral point for proving
the capabilities of the product for future customers.
Pilot testing involves having an early customer agree to have the sensors installed
within their business. In order to obtain a pilot test customer, the sensors will have to be
offered to the company free of charge. With that being said, the company that agrees to
run the pilot test must also agree to be available as a referral for other companies to
contact them and ensure that the sensors offer the stated benefits. Moreover, the pilot
testing company can be utilized in marking efforts, focusing on other companies in a
similar industry. If companies can refer to another similar company that has
implemented the sensors with proven benefits to their bottom line, then the target
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company will be more willing to purchase the sensors, having firm knowledge of the
benefits which the sensors will derive.
Creative Execution
The cost to run pilot tests is marginal in comparison to the potential business that the
tests will derive. The basic cost would depend entirely on the physical size on the
business and the extent to which the sensors are installed. The basic costs would include
installation costs and product cost at approximately $300 per room. The pilot tests are
more important for particular target markets. For example, Energex has already had
extensive pilot tests with credible hotels, such as Four Seasons and Hilton. However,
target markets, such as hospitals, have not had any pilot tests whatsoever. Therefore, it
is important to have pilot tests conducted in markets, where the product has not yet
entered, in order to build credibility with the particular market and to create a reference
point for potential customers.
In order to obtain pilot tests, companies within the target market should be targeted.
Ideally, the targeted companies should be located in British Columbia, contra to the
geographic location of the target markets. The reason is because it is easier to facilitate
installation, monitoring, and measurement of the sensors in British Columbia, with the
Energex headquarters are located in Richmond, BC. For example, obtaining a contract
with a regional hospital in BC, allowing the sensors to be installed, will enable Energex
to use the BC hospital as a referral point for Ontario hospitals, increasing product
credibility and establishing increased consumer confidence in the sensor. This same
methodology can be applied to all target markets.
Reach and Frequency
The pilot project that Energex will implement will reach one hospital. Later, the reach
will increase endlessly because the first pilot project will be used as a referral for many
other hospitals and other government organizations. People will be exposed to the
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Energex sensors very frequently, depending on how often they visit the pilot hospital as
well as other hospitals and see Energex products.
Budget
Based on the different types of marketing communications that have been mentioned,
the cost of each marketing vehicle can be found in the Appendix A, Table 33. The total
cost of marketing tactics for one year is $19,847.50. Please also see the Appendix A,
Table 34 for an implementation timeline of the marketing strategies.
Customer Acquisition Cost
The customer acquisition cost for the campaign is calculated by dividing the annual
spending on marketing initiatives by the number of potential customers gained in one
year. The total marketing budget for the first year is $19,847.50. The number of new
customers that Energex expects to acquire during the first year of operations is 22
businesses. Therefore, the customer acquisition cost for attaining one new customer is
$902.16. The customer acquisition cost is much lower than the amount that each
customer brings in as revenue for Energex.
Evaluation of Promotional Campaign
The Innovative Energy Solutions – For a Better Tomorrow campaign will use positive,
lifestyle, and factual marketing appeals to attract the target markets attention, interest,
desire, and action. Customer attention will be captured because they will want to know
how to save money on their energy consumption. Interest will be sparked because
Energex intelligent occupancy sensors can save 35% to 40% of energy consumed. The
desire will be for customers to visit www.energexinc.com to calculate their savings on
electricity bills. Action will be purchasing of Energex products and decreasing the stress
on the environment and customer’s wallet.
The communications plan will be evaluated and monitored in order to ensure its
effectiveness. First, Energex will monitor feedback received from approached
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companies. Second, Energex will measure the increases in its customer base. Third,
Energex will monitor and respond to feedback from new customers.
Marketing & Communications Plans – Summary
The two main goals of Energex in Ontario are: 1) to increase sales to $1,101,000 by year
three of operations, and 2) to increase brand name awareness. Eight marketing
strategies have been developed to reach these goals. Sponsorships, personal selling,
flyers, strategic alliances, web-marketing, Do-It-Yourself, bus ads, and pilot testing are
estimated to cost around $20,000 during the first year. These tactics will acquire 22 new
customers. Therefore, acquisition cost per one customer is $900. To compare, one
hospital is estimated to bring in $180,000 in revenue. These carefully developed
marketing strategies fit the preferences of the target markets. Smart selection of
marketing vehicles ensures the highest possible response rate and effectiveness.
INDUSTRY
Industry Definition
Industry Canada defines the industry that Energex operates in as “powers, distribution,
and specialty transformers manufacturing”29, a sub-industry of the “electrical
equipment manufacturing” industry. Energex has been classified in this industry by
Industry Canada because Energex assembles and installs motion sensors and energy
conservation technology, as described in the product section. Although this definition
of Energex is technically correct (due to the manufacturing aspect), it does not
accurately describe the true industry that Energex operates in.
The industry that Energex truly competes in is the “energy efficiency solutions”
industry, a sub-industry to the “environmental solutions” industry30. This industry
29 Industry Canada, NAICS 335311, 2008,
http://napoleon.ic.gc.ca/cis-sic/cis-sic.nsf/IDE/cis335311defe.html, accessed on April 28, 2008.
30 Industry Canada, Canadian Environmental Solutions, 2008,
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consists of companies which provide energy solutions to commercial, residential, and
governmental clients. The products and services these companies offer make customers
more eco-efficient through the use of software, monitoring systems, and eco-efficient
technologies that reduce or improve energy usage.
Industry Attractiveness
Industry attractiveness refers to the overall industry profitability, and how attractive
the industry is for new companies to enter and compete in. In this context, industry
attractiveness is affected by many different variables, such as industry life cycle and
capital structure.
The “environmental solutions” industry life cycle is currently in the growth stage
because there are virtually no companies exiting the industry. On the other hand, many
companies are entering this industry and capitalizing on the growing demand for
energy efficient technologies and services.
Moreover, in 2004, the environmental solutions industry employed approximately
251,000 people, posting a growth rate of 13.7 percent between 1999 and 2003. This
growth rate is 60 percent faster than the growth of the Canadian workforce as a whole
over the same period31. The graph 3 displays the growth of the global environmental
markets from 2000 – 2010; the graph 4 shows the current growth phase of this industry
in Canada.
http://www.ic.gc.ca/eic/site/ces-sec.nsf/eng/h_iq00011.html, accessed on April 28, 2009.
31 Statistics Canada, Environmental Labour Market Report, 2004,
http://www.ic.gc.ca/eic/site/ea-ae.nsf/eng/ea02548.html, accessed on April 28, 2009.
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Graph 3. Growth of Global Environmental Markets 2000 – 2010.
Graph 4. Energex Product Life Cycle.
In this industry, small firms (less than 100 employees) are the majority (96%) of
Canada’s environmental solutions companies32. The energy efficient solutions industry
is not concentrated. Meaning, no large company holds a significant portion of the
market, instead it is fragmented among many smaller firms. The industry is growing;
and there are many different environmental needs that are served by the technologies of
this industry. Examples of these technological needs include waste management, water
efficiency, energy efficiency, and pollution control.
With that being said, this industry is capital intensive – meaning it takes more capital,
rather than labour for a company to operate. In capital-intensive industries, it is more
difficult to start a new company due to the large capital requirements. This creates a
barrier for new entrants into the industry. This is beneficial for Energex because it
potentially decreases the threat of new competitors quickly entering the industry. In
32 Industry Canada, Canadian Environmental Industry, 2008,
http://www.ic.gc.ca/eic/site/ea-ae.nsf/vwapj/ea00020_eng.pdf/$file/ea00020_eng.pdf, accessed on
April 29, 2009.
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addition, the industry is not advertising intensive which makes it more attractive. Also,
Porter’s Five Forces analysis was conducted to evaluate general attractiveness of the
industry (see Appendix A, Tables 35). Overall, energy efficiency solutions industry is
very attractive for Energex.
According to industry Canada, presently there are 145 companies 33 operating in the
powers, distribution, and specialty transformers manufacturing industry. Ironically,
there are another 145 companies 34 that compete in the energy efficiency solutions
industry. As with Energex, some of the companies in these sectors are on both lists.
Sustainable Industry Advantage
Presently, Energex’ industry advantage is the EMU chip and software, which is
connected to the occupancy sensor. The software regulates both, heat and light, which is
a core competency when compared to direct competitors. Most of the direct competitors
offer products that monitor room occupancy and modify either room temperature or
lighting, but not both. Currently, the patent on the software in the EMU chip is pending.
If a patent was obtained, then it would create a definite industry advantage.
Acquiring major contracts with large customers such as hospitals, large building
operators, and major hotel chains would create an industry advantage for Energex for
several reasons. First, it would secure a steady stream of revenue for a set period of
time. Secondly, it would create a superior brand reputation in the regional target
market because the product would be further “tried and true” in terms of energy
efficiency and cost benefit, in which it derives.
33 Industry Canada, NAIC 335311Directory, 2008,
http://strategis.ic.gc.ca/app/ccc/sld/cmpny.do?lang=eng&profileId=1461&naics=335311, accessed on
April 29, 2009.
34 Industry Canada, Canadian Environmental Solutions Directory, 2008,
http://www.ic.gc.ca/app/ccc/sld/cmpny.do?lang=eng&profileId=1361&tag=226010005010, accessed on
April 29, 2009.
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There are several options available for creating a further competitive advantage in the
energy efficiency industry. Creating strategic alliances with one or several key industry
suppliers/distributors, such as Edwards , Honeywell, or Ontario Hydro 1, would allow
Energex products to be delivered to the end customer much more efficiently than
through personal “Energex” selling, the way it is done now. This business model of
business-to-distributor selling has allowed Energex’ competitor, Energy Eye, to flourish
and expand at an exponential rate.
Acquisition of different certifications, such as LEED buildings usage status, would also
boost the reputation and credibility of Energex products. Moreover, establishing
strategic relationships with major eco-efficiency consultants would further increase the
competitive advantage by generating additional revenues through consultants’
recommendations on improving their clients’ operations.
Competitor Analysis
The competitor analysis is designed to identify a competitive position of Energex in the
industry and to identify the competitors, who pose the greatest amount of threat.
Initially, Canadian and American companies, who offered products similar to Energex,
were identified. These companies where evaluated on the basis of geographical
location, size of the company, number of years in business, product lines offered, level
of similarity to Energex’ products, and designed use of the product offerings. These
criteria allowed ECG to identify which of the competitors posed the greatest amount
threat to the market share of Energex.
Once identified, the primary competitors were analyzed further on the basis of: (1) the
number of certifications the product has, (2) the company’s method and capacity of
distributing the product, (3) product technological attributes, (4) the level of customer
service, and (5) the target market of the company. Refer to the Appendix B, Table 36 for
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the competitor analysis matrix and Table 37 for the primary competitor matrix. The
following is a description of each primary competitor.
InnCom
InnCom was established in 1986 in Niantic, Connecticut. The company is well known
within the energy efficiency solutions industry. InnCom has made over hotel 650,000
rooms worldwide more convenient, comfortable, and energy efficient. In terms of
customer service, InnCom provides customers with contact information of potential
partners worldwide. This is intended for customers who are interested in finding local
business partners or in becoming a local business partner of InnCom.
Moreover, InnCom offers education services to hotel manager/operators and
residential clients. On the other side, Energex focuses on a broader target segment,
which increases its chances of success. InnCom has a call centre to answer and
customers and contractors questions. The company also offers engineering consulting to
clients.35 In terms of distribution capabilities, InnCom has many distributors around
the world including: United States, Mexico, Hong Kong, Caribbean, and South America.
On the contrary, Energex is lacking in its distribution channels. Additionally, InnCom
has many subsidiaries that offer installation services.36
InnCom’s products offer the following features: temperature control, lightning control,
humidity control, and custom designs.37 Temperature and lighting controls Energex
and InnCom have in common. But Energex’ products do not regulate humidity; instead,
they regulate air conditioning. Overall, InnCom poses a big threat to Energex because
InnCom’s products have similar features, and because InnCom is a growing global
corporation.
35 INNCOM 2009, Discover INNCOM, INNCOM Company Web site,
http://www.inncom.com/discover_inncom/index.html, accessed on June 26, 2009.
36 Ibid.
37 Ibid.
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Energy Eye
Energy Eye is a privately held corporation founded in 2001 located in San Diego, CA38.
It is aiming to be a leader in energy management solutions through design,
manufacturing, and distribution of its wholly owned Energy Eye™ wireless energy
saving products. Energy Eye’s product function is very similar to Energex’; it is also
using sensor-based technology which integrates lighting control and heat control
together. In terms of customer service, Energy Eye provides a much wider services than
Energex, the company is able to provide its technical support globally; it also offers
two-year warranty and information support that share their energy saving experience
with customers.
Energy Eye is selling its products mainly through distributors both domestically and
internationally. The company’s distribution capability is very strong. It has nine US
distributors, three certified installers, three Canadian distributors, and 16 distributors
outside of North America39. Whereas Energex’ distribution capability is quite weak;
and, mostly, its sales depend on personal selling. In terms of the target market, Energy
Eye focuses on hospitality industry, especially on hotels. In contrast, Energex has a
broad target market including hotels and commercial institutions. After weighing the
above five major criteria, ECG found that Energy Eye is a very strong competitor which
is able to create a threat as Energex enters the new market of Ontario.
Happy Building
The company started in Courtney, BC in 1985. Happy Building’s products include
sensor-based devices regulating heat and air conditioning. They do not regulate lights
or humidity. Some of the technological attributes include motion detector and
thermostat regulating temperature combined together. Majority of the products are
wireless. On the other hand, Energex emphasizes wired technology because it is more
reliable and requires minimal maintenance.
38 Energy Eye, About, Energy Eye Company Web site, http://www.energy-eye.com/about-
energyeye.htm, accessed July 10, 2009.
39 ibid
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Happy Building has been in business for 24 years; however, they have not yet
encountered any certifications or strategic alliances. The main way Happy Building
distributes its products is personal selling. Compared to Energex, this method is less
efficient and reaches smaller portion of customers. Energex uses distributors as well as
sales people to sell its products. Moreover, Happy Building’s primary target market is
building owners, who are in business of renting apartments. However, for Energex,
apartment building owners represents only one of many target markets it pursues.
Reading customers’ testimonials on Happy Building’s website leaves an impression that
the company is doing really well. However, after taking a more skeptical stand point
and analyzing company’s competitive position, ECG concluded that Happy Building is
not a major threat to Energex it terms of competition. The reason being two-fold; firstly,
they have a less functional product than Energex, and, secondly, they pursue only a
small portion of Energex’ overall target market.
DimOnOff
DimOnOff Inc. is a company that provides energy monitoring and control solutions
throughout North America. It is a privately-owned company based in Quebec, Canada,
and made up of 4 employees. The company, which was founded in 2005, targets
organizations of any size to improve their electrical infrastructure in terms of
monitoring and control. However, their specialties are larger buildings, such as arenas,
warehouses, parking lots or car dealerships. They do not do residential units.
It seems that the company focuses on more of the industrial sector, where they use the
existing electrical network to operate the lighting controls. However, they also serve the
commercial and institutional sectors. They provide customization options, such as light,
temperature, and occupancy sensors, as well as software and internet connectivity.
Although they have done work at university and colleges, DimOnOff only worked on
areas such as the hockey arena, the gymnasium, greenhouses or even laboratories, but
not dorm units or smaller classrooms. In regard to commercial buildings, they have
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installed their products at the Bank of Montreal in Toronto, and at the Chrysler
dealership in Scarborough, Ontario.
As DimOnOff shifts towards more commercial contracts, the level of threat towards
Energex increases. Although they do not do small room units, it seems it could be a
matter of time before they do. As Energex grows into larger-scale projects, the level of
competition between DimOnOff and Energex will be tense, as they will be both
targeting the Ontario market, where DimOnOff has majority of its partners and agents.
Energex Comparison
The companies that appear to pose the most significant threat to Energex are InnCom
and Energy Eye. Both of these companies offer intelligent occupancy sensors that
regulate heat, light, and humidity. In addition, both of these companies target the hotel
industry with their products that are similar to Energex’. InnCom and Energy Eye rely
heavily on distributors to get their product to the end customer, whereas Energex is
currently employing a model of personal selling. This is a major difference in
distribution tactics.
Happy building and DimOnOff do not pose as significant a threat as the latter two
competitors for several reasons. Currently, DimOnOff targets large
commercial/industrial buildings and does not have experience outfitting their product
in smaller areas, such as hotel rooms. Happy Building targets only apartment buildings.
Since both of these competitors target different industries than Energex, this makes
them less threatening. However, they may not be significant competitors at the
moment; this does not mean that they will not evolve into a more competent threat.
When all of the companies where compared on the basis of product features and the
number of industry certifications, it became visually clear that both InnCom and Energy
Eye are the most threatening competitors to Energex (see graph 5). These two
companies have the potential ability encroach on Energex market share and steal sales.
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Graph 5. Competitor Grid.
Many Product
Features
InnCom
Energy Eye Energex
Few
Many
Certifications
Certifications Happy
Building
Dimonoff
Few Product
Features
Industry – Summary
The industry, in which Energex competes, is called “energy efficiency solutions”
industry. On one hand, industry life cycle is currently in the growth stage because there
are virtually no companies in the industry. On the other hand, many companies are
entering this industry and capitalizing on the growing demand for energy efficient
technologies and services. Energex’ sustainable competitive advantage is the EMU chip
and software, which is connected to the occupancy sensor. The software regulates both,
heat and lights, which is a core competency when compared to direct competitors.
There are two competitors in North America who pose serious threat to Energex:
InnCom (sensors regulate heat, light, and humidity) and Energy Eye (sensors regulate
heat and light).
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PEOPLE
Founder & President
Rami Belson is the founder and owner of Energex. Mr. Belson has been doing business
in the energy efficiency solutions industry since 1992, working closely with BC Hydro.
His interpersonal skills and natural charisma help him conduct successful business.
Energex Consulting Group
The entire consulting team consists of current students of Royal Roads University,
pursuing an education in the Bachelor of Commerce program, where there is a high
emphasis on entrepreneurial management. Each member is expected to graduate in
September, 2009. The members of the ECG include:
Jennifer Carmin Campos
Jennifer holds a Business Administration-Marketing diploma from Conestoga College,
Ontario and speaks four languages including Spanish, English, Hindi, and French. She
has achieved the Danby and Products Limited Award, for creating a feasible and viable
business plan for a fictional retail store, called Vibe Connections. Vibe Connections
offers high-quality street wear apparel. She is currently the VP of Marketing and
Communications for SIFE Royal Roads.
Kurtis Dool
Kurtis was born in Toronto, Ontario. Kurtis has a background in International Trade
and Transportation from BCIT and has been involved in the ACE Entrepreneurship and
Financial Portfolio Management Program. Kurtis has worked with his colleague, Yulia,
at Leavitt Machinery to examine the distribution system and create a cost/benefit
analysis for several new distribution options. Recently, he has received the BCool
Award as the best critical thinker in the program.
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Frank Li
Frank has a background in Business Administration from CIBT in Beijing, China and is
fluent in Mandarin. He perfected his English at Vancouver Community College after
receiving financial training in China. 2008-present, Frank has been working towards his
BCom degree at Royal Roads University. As all Frank’s team experiences indicate, he is
a very good team member with excellent interpersonal skills.
Danny Molina
Danny has a background in International Trade and Transportation from BCIT and is
fluent in Spanish after having lived and travelled in South America for 5 years. Danny
has created a strategic marketing plan for WestAqua Inc., a large supplier of animal
feed interested in the U.S. market.
Yulia Victorova
Yulia has a background in International Trade and Transportation from BCIT (Honours
Graduate) and is fluent in Russian. She is currently involved in several volunteer and
extra-curricular activities focusing on International Trade. She has worked with Kurtis
at Leavitt Machinery to examine the distribution system and create a cost/benefit
analysis for several new distribution options. Recently, she has also received the BCool
Award as the best critical thinker in the program.
Mission, Personal Aspirations, Risk Propensity – ECG
The mission of the ECG is to take Energex to the next level. Currently, sales have been
stagnant; and the founder, Rami Belson, has shown interest in penetrating a new
market with a comprehensive marketing strategy and business plan. This will increase
annual revenues and brand awareness.
Our goal is to create a profitable business model for Energex in a new market, with no
intent of ever using the information for competitive purposes. The objective of ECG is to
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use the skills and knowledge obtained from work, personal, and academic experiences.
This will be applied to the Energex endeavour of finding a highly receptive market with
the highest potential for profit maximization.
We currently have no ownership or stake in the company. In other words, Rami Belson
is the sole owner of Energex. We are aware that outsider investments into the company,
as well as partnerships, may be a key success factor for growth, but we will do what it
takes to mitigate and reduce the risks of doing so. The concept of a cost-benefit analysis
is very clear to all of us, tangibly and intangibly.
The team sees a great potential for this product in the Ontario market. However, as
mentioned before, we seek to find the market with the highest potential for profit. In
terms of viability, we believe Energex and its products can be successful for years to
come. Energy costs are on the rise and the cultural movement towards environmentally
friendly products is becoming more of a priority in the minds of Canadians, as well as
the rest of the globe.
Connectedness
Mr. Belson has been competing in the energy efficient solution industry since 1992.
Over the past decade and a half, he has created relationships within the hotel industry,
for instance, the Pan Pacific. Considering that Energex has been in business since 1992,
relations with suppliers are well-developed. Energex products can be found in
strategically hand-picked locations, mostly in the hotel industry, ranging from hotels in
Belize to hotels in Europe. This is not only evidence that the product is receptive, but
the relationships can be used to vouch for the effectiveness of the product on behalf of
Energex. Overall, Rami Belson’s connectedness within the industry is a key factor for
the success of the venture, as he will be able to assist the ECG with expert knowledge.
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Ability to Execute
Several factors are necessary for the success of Energex in Ontario. Firstly, there must be
a broad and detailed understanding of the market in terms of competition, demand,
customers and the current situation. Secondly, management needs to be aware of the
need for continuous innovation as well as the need for partnerships and network
building. Therefore, Energex will strive to continuously upgrade their products and
product line in order to have the latest energy-solution technology and will commit to
building relationships with communities, government, and companies in the interest of
both Energex and the party involved.
A significant factor for success is a management team with the ability to execute the
following Critical Success Factors (CSFs):
o CSF 1: Market Strategy
o CSF 2: Financial Controls
o CSF 3: Operational Strategy
o CSF 4: Communication/Sales
o CSF 5: Transportation & Logistics
o CSF 6: Product & Industry Knowledge Expert
Energex Management Team
Rami Belson, as founder and CEO of Energex, will lead and oversee the expansion to
the Ontario market, using his 17 years of experience in the industry to acquire
customers, as well as build relationships. An additional regional director may be
required once the increase in sales becomes too large that it interferes with the quality of
service in Ontario, British Columbia, and other markets. As sales begin to increase,
additional staff may be required for the manufacturing of the components, installations,
as well as order filling, inquiries, and other administrative tasks.
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The founder and management members are well aware of the CSFs for this endeavour;
and all critical functions are under the control of Energex. All members are clear about
their roles and committed to the success of the venture.
Energex Management Team Matrix
By comparing the Energex management team against the CSFs required for this
venture, blind spots can be avoided as obvious skill gaps are exposed. The matrix 2
reflects that the major skills needed to achieve the CSFs are covered by management
members with relevant experience, and any lack of expertise in one area can be
complimented by another member, most likely, Rami Belson, who holds experience and
knowledge over the other fields given his seniority in the industry.
The Founder and CEO, Rami Belson, will have complete leadership over the direction
of the venture, as well as full ownership. Please see Appendix B for the shareholder
agreement which defines the ownership structure.
Matrix 2. Energex Management Team Matrix.
Name/Role Key Skill CSF 1: CSF 2: CSF 3: CSF 4: CSF 5: CSF 6:
Required Marketing Operations Financial Commun Transport & Industry &
Strategy Strategy Accounting ication & Logistics Product
Sales Knowledge
Rami, CEO Experience in Rami
all areas
Yulia, Transportation Yulia
VP Logistics and Logistics
Danny, VP Network Danny
Sales Building
Frank, Financial Frank
VP Financials Controls
Kurtis, VP Operational Kurtis
Operations Management
Jennifer, VP Product Jennifer
Marketing Positioning
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Evaluating Energex Management Team
A team’s success depends on its ability to identify industry CSFs and its ability to attract
people with the skills and knowledge to build around those CSFs. The founder and
CEO, Rami Belson, along with a small team of 7 more members, have currently
established their company in BC. By following a similar structure, a management team
of 5-6 educated and experienced members could be as effective, if not more, in
marketing and delivering the products to the dense market of Ontario. The Ontario
team and CEO are aware of what it takes to be successful, and along with their talent
and knowledge, will apply those skills for the success of the company. Any lack of
depth of experience can be fulfilled by the experience gained by the founder and CEO
during his B.C. operations. As shown on the chart below, ECG is a team with high
understanding of the CSFs as well as relevant experience, which places ECG team as an
“A” Team.
Understanding of
Industry’s CSFs
“B” TEAM “A” TEAM
“C” TEAM
“B” TEAM
Skills Set (Fit to CSFs and Depth of Experience)
Software Manufacturing Relationships
Energex has its core competency, the EMU chip with software that serves as the “brain”
for the product, made locally in Richmond, BC, a short distance away from company
headquarters. This allows for quick specification changes or urgent pick-ups if needed.
The chip manufacturing company is a large supplier of chips meaning they have the
ability to increase supply capacity.
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Risks & Mitigation
Product
One of the main concerns of expanding sales is the need for more capacity to
manufacture the product. We will address this issue by continuously monitoring lead-
time and order fulfillment data; and if a cost-benefit analysis deems it beneficial to
expand production facilities, Energex would be willing to hire more employees or
outsource components that are not critical enough to make in-house only.
A major marketing tactic involves the creation of the Do-it-Yourself version of the
Energex products. Engineers would have to re-design the product so that any average
homeowner could easily install it. In the case that the engineers are not able to do this,
management will review the potential payoff of this tactic and determine whether it
would be cost-effective to continue to strive for the creation of this kind of product or
whether it would make more sense to focus efforts elsewhere.
In the situation that Energex does not receive their pending patents, thus increasing the
vulnerability of the company, it would be wise to continue to pursue various ways of
securing the product. Energex could experiment with patenting different combinations
of features or software in existing products, or with creating a new feature or software
altogether.
People
A major concern with the proposed management is the fact that they have limited
industry experience, depending on their academic knowledge to implement the plan
successfully. Although they are hard-working and ambitious individuals, it may turn
out that the learning curve proves to be too steep. Energex should mitigate this risk by
thinking about possible replacements for leadership in BC, so Mr. Belson can visit the
operations in Ontario and help the Ontario team get past any hurdles, while not having
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to worry about operations in BC. Also, allowing the management team members to take
on courses that will enhance their performance is advisable.
The other concern is whether this management team is truly committed to making
sacrifices in order to grow the business in the Ontario market. It may be a matter of
increasing commissions, increasing the annual salary, or allowing for ownership
and/or profit sharing. A meeting regarding employee satisfaction would be wise before
discussing the matter further.
Money
In terms of financials, the major risk is an unexpected expense or lack of revenue, and
cash flow dries up. In this situation, the management team plans to review the income
statements and balance sheets and to create a new expense budget, which will ensure
the survival of the company. If that condition cannot be met, management will be
expected to create a plan on how extra cash flow would help the company and present
it to the CEO as a request for funding.
In the case of lack of investment, plans may need to be postponed until funds are
collected. Management would then need to review the business plan, the strategies, and
their selling pitch. It may be the case that more networking is required, and therefore
more efforts are to be directed, where needed, in order to attract investments.
Market
The first market factor that could threaten the success of Energex in Ontario is inability
to achieve target sales, which are already quite conservative. In this situation, the
management team will review marketing strategies, and see whether the market needs
are consistent with the product benefits. Research into new markets or reviewing
marketing tactics may be required if tactics prove to be ineffective.
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The second market risk is inconsistency of marketing tactics. A company’s message to
its target market being unclear and inconsistent is a common mistake in company
marketing strategies. Monthly meetings between executives will mitigate this risk by
sharpening the impact of the Energex identity in the community. Any new marketing
tactics or advertisements are to be monitored in terms of effectiveness, cost-benefit, and
the overall message.
In regard to the political environment, it is comfortable knowing that environmentalism
and concern with energy waste is increasing; however, important incentives or
regulations that help our industry may one day change, and therefore Energex needs to
be prepared. A contingency plan outlining what to do, in case this situation happens,
would be a wise to have. Continuous monitoring of the external environment is key,
especially in the case of political, economic, social and technological matters.
Industry
The greatest concern is that current research underestimates the competition, and
Energex faces even greater challenges. This risk can be reduced by monitoring the
activity of competition closely and by anticipating their future developments. A review
of the competitive markets should be conducted at least every three months.
The next industry trend is the creation of humidity sensors in the product. Energex risks
falling behind its competitors, Inncom and Energy Eye, who are constantly developing
new features in their products. Energex needs to address this issue by focusing efforts
on innovation and creation of new products or services.
Milestones/Timeline
The operational milestones for Energex are listed in a six-step process. The process
begins with the test phase and ends with an ongoing evaluation, control, and
improvement of operations. The steps are outlined below and are presented as a
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timeline in the Appendix A, Table 38. To achieve the goals of increasing sales and
creating brand name awareness, Energex needs to execute the following steps in the
Ontario market:
1. Energex engineers simplify the product, create a Do-it-Yourself model, and test it
for quality and practicality.
2. ECG contacts HomeDepot to find out if the retailer is interested in selling
Energex Do-it-Yourself products.
3. Energex produces Do-it-Yourself products for HomeDepot if the retailer agrees
to carry them.
4. Two members of ECG set up operations in Ontario by:
i. Leasing a 2000 sq. ft. warehouse in Mississauga,
ii. Buying office equipment and a car,
iii. Acquiring customers through developed marketing communication
tactics (see a marketing communications timeline in the Appendix A,
Table 34).
5. Energex employees manufacture the products: both, DIY and normal, and
transport them to Ontario.
6. ECG continuously evaluates, controls, and improves Energex operations in
Ontario.
Stage 1 – Steps 1 to 3 (September 2009 – November 2009)
Stage 1’s main goal is to create a simplified motion sensor, DIY, and test it. After the
creation of the DIY prototype, Energex will target the residential segment. A month is
delegated for the testing phase in case product specifications will require more time to
develop. After the simplified prototype is created, the sales representative will contact
HomeDepot and propose the DIY product to be sold at their locations. Energex will try
and acquire HomeDepot as a customer within in a month. If HomeDepot agrees to the
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proposal, then more DIY sensors will be produced by Energex and shipped to the
retailers.
Stage 2 – Step 4 (December 2009 – December 2010)
The second stage refers to the setup of Energex operations in the Ontario market. This
stage includes leasing the warehouse in Mississauga, purchasing necessary office
equipment and furniture, and acquiring new target customers. Energex will acquire
new customers through marketing tactics described in the marketing plan section of the
report. Eight selected marketing tactics will take place during 2010, the timeline for this
can be found in Appendix A, Table 34. The implementation of the integrated marketing
campaign is a part of the whole implementation plan for Energex in Ontario.
Stage 3 – Step 5 (On-going)
During stage 3, the products will be manufactured in Richmond, British Columbia and
transported to Mississauga, Ontario. This step is on-going and is based on the Ontario
demand. Possible expansion of manufacturing facilities in Richmond will be required in
order to meet the demand.
Stage 4 – Step 6 (On-going)
Overall, all four stages of the implementation plan are critical to a successful execution
of the project in the Ontario market. To ensure all tasks stay on track, ECG will
continuously evaluate, control, and improve Energex strategies their execution. Stage
four will require much analysis of the external environment, strategies, and outcomes to
ensure a solid presence of Energex in the Ontario market.
People – Summary
ECG will execute the project in Ontario with the help of Energex’ CEO, Rami Belson.
Rami Belson is well connected within the industry and up- and down- the supply chain.
The passion of people working on the Ontario project will ensure their ability to execute
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the critical success factors, such as market strategy, financial controls, operational
strategy, communication/sales, transportation & logistics, product & industry
knowledge. EGC possesses all the necessary knowledge to implement the project;
however, if any gaps between the team members’ skills and project requirements
emerge, Mr Belson will help.
FINANCE
Price and Revenue Models
The product costs approximately $300 per room. The price also varies depending on the
type of product the customer chooses (for example, wired version vs. wireless one).
Energex’ revenue model is mostly one-time sales through personal selling. The major
revenue comes from providing unique energy solutions for businesses, consumers, and
government. However, Energex is considering alternate revenue sources, such as full
installation services, warranty, and customer support. In addition, Energex is also
planning to sell its products through some major retailers domestically and overseas.
Operating and Cash Cycles
Energex has two major inventory sections: (1) finished goods inventory and (2) raw
materials inventory. Because of the one-time sales model, it is hard to anticipate sales
from month to month. Therefore, in order to keep an optimized inventory, the raw
materials inventory should be kept as low as possible. It is easy and quick to ship
necessary raw materials to Ontario because they mainly come from Canada or the U.S.
The finished goods inventory should be kept at least 50% of capacity, according to the
best industry practices. This will enable Energex to keep its operations on time and
satisfy its contractual obligations.
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Furthermore, the cash cycle will be optimized by negotiating payment extensions with
suppliers, while keeping the receivables period under the average of 90 days. After
many years of cooperation with suppliers in North America, Energex will be able to get
more lenient terms such as payment term extensions. Energex will give payment credit
terms for its customers up to 90 days based the size of the contract and the credit rating
of the customer. However, Energex will require a 30% deposit of total costs in order to
keep the cash cycle running smoothly.
Financial Projection
ECG has developed pro forma income statements and balance sheets for Energex
operations in Ontario. Energex will achieve a solid financial position through
continuous market penetration in different market segments, such as residential,
commercial, and institutional. A three-year sales projection and profit growth for
Ontario market is shown in the Graph 6. Since Energex is an established company,
entering the Ontario market will not incur losses for the company. However, the profit
will be quite small in the first year of operations. The sizes of the Energex potential
markets were estimated for three years. In 2009, the sales and net profit will be $348,000
and $54,015, respectively. In 2010, the sales will increase 50.64% to $705,000 and result
in the net profit of $137,781. In 2011, Energex Ontario will be able to surpass the $1
million sales goal by $101,000 and achieve a net profit of $230,698. For detailed
information about the financial projections, including sensitivity analysis, please see
Appendix A, Tables 39-47.
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Graph 6. Sales and Profit Projection.
Sales and Profit Growth
$1,200,000
$1,000,000
$800,000
SALES
$600,000
NET Profit/Loss
$400,000
$200,000
$0
2009 2010 2011
Historical Sales and Unit Break-even Analysis
To determine the break-even point for Energex, a contribution analysis is used. Energex
is an established company, and it is considering entering a new market of Ontario.
Contribution analysis helps Energex determine whether the new project is financially
attractive. For Energex to go ahead with the new market, total revenues must exceed
total fixed and variable costs. Contribution analysis points out the relationship between
price of the product, its costs, and contribution margin. It is important because the
structure of fixed vs. variable costs has a significant influence on the venture.
Firstly, the consultants determined the variable and fixed costs that were incurred by
Energex in 2006-2008. Variable costs increase directly and proportionally with the level
of sales. For Energex such costs include, for example, advertizing expense, sales
commissions, and office supplies. Fixed costs remain the same regardless of the sales
level. Some fixed costs for Energex include rent, salaries, and insurance. The complete
breakdown of fixed vs. variable costs can be found in Appendix A, Tables 48-51.
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Secondly, the contribution margin is determined by subtracting variable costs from
revenues. For years 2006-2008, the contribution margin is $349,220, $271,037, and
$403,657, respectively. Then, sales break-even (in dollars) equals fixed costs divided by
contribution margin ratio ([revenue-variable costs]/revenue). Sales break-even for 2006-
2008 is $810,969, $731,336, and $435,651, respectively. This explains why Energex
incurred losses in years 2006-2007 with sales of $793,400 and $581,482. However, in
2008, with sales of $658,107, Energex made a profit.
Finally, break-even in units is calculated by dividing sales break-even by the price per
unit. Energex’ products sell for $300 per unit to end customers. Therefore, break-even in
units for 2006-2008 is 2703, 2438, and 1452 units, respectively. The actual number of
units sold, for 2006-2008, was 2645, 1938, and 2194 units, respectively. Once again, this
explains why Energex experienced losses in 2006-2007, and a profit in 2008 (see
Appendix A, Tables 52-53 for the full analysis).
Break-even for the Ontario Market
After determining the forecasted sales and operational costs for the Ontario market, the
new break-even analysis was conducted to determine the level at which Energex starts
making a profit. The analysis is shown in the Graph 7. In 2009, the break-even in units is
890. However, the expected sales are 1160 units. The difference between the two figures
is quite small because of the major set-up costs, which will be incurred during the first
year of operations. As the costs decrease gradually, in 2010, the break-even is 1474 units,
compared to 2350 units in expected sales. In 2011, the break-even is 2144 units,
compared to 3670 units in expected sales. Starting in 2010, the margin between the
break-even and expected sales increases at an average rate of 55.89%. This indicates that
Energex will have a steady growth in the Ontario market. Please see Appendix A,
Tables 52-53 for detailed information.
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Graph 7. Energex Ontario Break-even Analysis.
Break-even and Forecasted Sales
4000
3500
3000
2500
Break-even units
2000
Future Sales units
1500
1000
500
0
2009 2010 2011
Turning Cash Positive
It is of critical importance for a new project to generate positive cash flows. Cash can be
generated from operating activities (core business activity), investment activities (for
example, purchase/sale of assets), and financing activities (issuing debt). At the point
where a new project turns cash positive, revenue generated is sufficient enough to cover
and exceed all start-up expenditures.
To this moment, Energex has been in business for 17 years, and the company has
already generated positive cash flows and covered its initial investment. Now, Energex
is looking to expand into Ontario market which means new start-up costs will be
required.
Based on the research, the consultants determined that a minimum of $ 79,212 will be
required to start up Energex operations in the Ontario market. The initial start-up costs
will be incurred during the first year. As can be seen on the graph 8, Energex Ontario
will turn cash positive during the fourth quarter of 2009 and cover all the start-up
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capital invested during the first quarter of 2010. Please see Appendix A, Table 54 for
detailed information.
Graph 8. Cumulative Cash flow and Profit, 2009-2012.
Energex New Venture Cash Flow
$500,000
$400,000
$300,000
Cash Flow
$200,000
$100,000 $85,053 Cumulative Cash Flow
$0 $22,515 Cumulative Profit
-$100,000
-$200,000
0 1 2 3 4 5 6 7 8 9 10 11 12
Time (Yearly Quarters)
Investment Offering
Investment offering consists of the following parts: funding request, use of funds,
valuation, deal structure, and exit strategy. ECG is looking for a minimum investment
of $80,000 in exchange for 29% of the parent company’s shares. The money will allow
ECG to start up operations in the Ontario market, until Energex turns cash positive in
the fourth quarter of 2009. $80,000 will be used for operations (see Appendix A, Table
55). Graph 9 shows the breakdown of the required funds.
To determine that the investors should get 29% of Energex for $80,000, the fundamental
method of valuation was used. First, to evaluate the company as of today, pro forma net
income figures for 2009-2012 were discounted at a rate of 25%. These numbers ($65,255
in the first year, $151,734 in the second year, and $243,675 in the third year) are net
incomes of both, Energex and Energex Ontario. The rate of 25% was used because
Energex is an established company with industry experience. The potential for a major
success is beginning to be apparent as the founder is making plans for harvest. These
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numbers suggest that the net present value of Energex as a whole, based on its future
cash flows, is $274, 076. Second, to determine the deal structure, the required
investment is divided by the net present value of Energex future cash flows. Therefore,
the potential investors should receive 29% of Energex in exchange for an 80,000-dollar
investment.
Energex’ exit strategy in the future is a possible acquisition or a merger with another
company, which is why the fundamental method of valuation is used. The CEO of
Energex is considering selling the company after the successful penetration of the
Canadian market.
Graph 9.Proposed use of the requested funds.
$1,792, 2%
Warehouse
$26,400, 33%
Transportation
$40,000, 50% SMART Car
Office Furniture/Equipment
Working Capital
$6,283, 8% Miscellaneous
$3,319, 4% $2,206, 3%
Page 72 of 128
- INNOVATIVE ENERGY SOLUTIONS –
Finances – Summary
In Ontario, Energex products will be sold at the same price of $300 per unit. The
expected sales, net income, and break-even in units for 2009-2011 will be as follows:
2009 2010 2011
Sales ($) $348,000 $705,000 $1,101,000
Net Income ($) $54,015 $137,781 $230,698
Break-even (units) 890 1474 2144
Sales (units) 1160 2350 3670
Energex Ontario is expected to turn cash positive during the fourth quarter of 2009 and
to cover the start-up capital during the first quarter of 2010. Energex Ontario is open to
investment opportunities. ECG is looking for $80,000 investment to set up operations in
Ontario. In exchange, the investors will receive 29% of the company.
CONCLUSION
The project evaluates the venture idea in terms of durability, viability, and credibility.
Five different aspects of the business are examined: product, market, industry, people,
and finance. These aspects are crucial to the success of Energex Ontario.
Energex is an established company that produces a very innovative product – an
intelligent occupancy sensor. The sensors turn off light and heat, when a room is not
being used. The main purpose of the product is to save energy; and, therefore, money.
The industry is growing and will continue to grow. The opportunity exists in the
market that was chosen for Energex to expand into. Specific buyer segments will be
targeted in Ontario in order to increase sales for Energex. The expected sales for the
Ontario market are quite conservative; however, they answer the requirements of the
project. Energex Ontario will turn cash positive during the first year of operations and
will cover start-up costs during the second year of operations. Potential investors are
welcome to provide ECG with $80,000 for 29% of the company. The management team,
Page 73 of 128
- INNOVATIVE ENERGY SOLUTIONS –
consisting of the CEO of Energex and five consultants, is capable of executing the
project. These individuals are committed to the goal of transforming Energex into a
global corporation.
The conducted analysis helps to determine whether the venture idea is worth pursuing
or not. According to the analysis, expansion of Energex into the Ontario market, based
on the five business aspects, proved favourable in theory. In a strategic sense, Ontario is
a gateway into Canada and the world. However, the competition remains the major
threat. Energex needs to constantly scan the external environment and focus on product
innovation. Even though some question Energex’ ability to become a successful
company, we strongly believe that the opportunity lies ahead. We know that Energex
will reach its goals and will grow with the environmental solutions industry.
Page 74 of 128
- INNOVATIVE ENERGY SOLUTIONS –
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sic.nsf/IDE/cis72defe.html, accessed on May 29, 2009.
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Industry Canada Web site. The North American Industry Classification System. Services-
Producing Industries,
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Jefferson, Jim. Energy Efficiency Opportunities in Ontario Hospitals. Ontario Power Authority
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iciency/$file/Energy+Efficiency+Opportunities+feb28.pdf, accessed on May 31, 2009.
Hotel-industry.learnhub.com, 2009. Classification of Hotels, http://hotel-
industry.learnhub.com/lesson/8842-classification-of-hotels, accessed on May 21, 2009.
McOrmond Russell. (2009). Software Patent Issues. FLORA Community Consulting, 2003.
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Natalia Mainprize, Brent Mainprize, and Kevin Hindle, Venture Intelligence: How Smart
Investors and Entrepreneurs Evaluate New Ventures. (Printed in Canada, 2009).
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Survey. Summary Report June 2007,
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2009.
Ontario Ministry of Health and Long-term Care. Hospitals.
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28, 2009.
Power House Company. “Radiant Floor Heating.” Power House Company Web site,
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2009.
Page 76 of 128
- INNOVATIVE ENERGY SOLUTIONS –
APPENDIX
Appendix A – Tables
Table 1 – Regional Market Data
Regional Markets
Variable British Columbia Prairies Ontario Quebec Maritimes
Energy Usage (terajoules) 920,052 1,980,755 2,615,918 1,628,239 519,466
Energy Costs (Cents/kWh) 6.98 10.26 11.17 6.81 12.13
Temperature Extremes (High/Low Mean) (July/January) 23/-10 >25/-19 >25/-22 >25/-22 20/-14
Environmental Expenditure (millions) 1,740 2,811 5,704 14,149 962
Environmental Concern (% people with environment as first23%
concern) 19% 28% 46% 30%
Population size 4,381,600 5,809,100 12,929,000 7,750,500 2,284,779
Table 2 – Regional Market Score
Regional Markets
Variable Weight British Columbia Prairies Ontario Quebec Maritimes
Energy Usage (terajoules) 20% 2 0.40 4 0.80 5 1.00 3 0.60 1 0.20
Energy Costs (Cents/kWh) 22% 2 0.44 3 0.66 4 0.88 1 0.22 5 1.10
Temperature Extremes (High/Low Mean) (January/July) 16% 2 0.32 4 0.64 5 0.80 5 0.80 3 0.48
Environmental Expenditure (millions) 10% 2 0.20 3 0.30 4 0.40 5 0.50 1 0.10
Environmental Concern (% people with environment as first14%
concern) 2 0.28 1 0.14 3 0.42 5 0.70 4 0.56
Population size 18% 2 0.36 3 0.54 5 0.90 4 0.72 1 0.18
TOTAL 100% 2.00 3.08 4.40 3.54 2.62
Table 3 – Ontario Industries Data
Ontario Industy Markets
Variable Hotels Government Offices Educational Health Care
Frequency of Building Use High Medium High Medium High
Energy Intensity (GJ/M squared) - 1.58 Avg 1.58 1.61 2.08 0.94 2.46
Percentage Industry Energy Efficiency Retrofits 20% 13% 12% 10% 26%
Percentage of Building Air-Conditioned 61% 84% 91% 57% 93%
Table 4 – Ontario Industries Score
Ontario Industry Markets
Variable Weight Hotels Government Offices Educational Health Care
Frequency of Building Use 20% 5 1.00 3 0.60 5 1.00 3 0.60 5 1.00
Energy Intensity (GJ/M squared) - 1.58 Avg 30% 2 0.60 3 0.90 4 1.20 1 0.30 5 1.50
Energy Efficiency Retrofits 25% 4 1.00 3 0.75 2 0.50 1 0.25 5 1.25
Percentage of Building Air-Conditioned 25% 2 0.50 3 0.75 4 1.00 1 0.25 5 1.25
TOTAL 100% 3.10 3.00 3.70 1.40 5.00
Page 77 of 128
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Table 5 – Colleges and Universities in Ontario
Source: http://u101.com/colleges/Ontario/
Number of Universities & Colleges in Ontario
# School Location Residence
Barrie, Brampton, Hamilton,
Kitchener, London,
Mississauga,
Newmarket, North York,
Everest College of Business, Technology and Health Care
Ottawa,
Scarborough, Sudbury,
Thunder Bay,
1 Toronto, & Windsor no
2 The Art Institute of Toronto Toronto no
3 Herzing College Ottawa & Toronto no
4 Adler Graduate School of Ontario, Inc. Toronto ?
5 Algonquin College Ottawa yes
6 Assumption University Windsor no
7 Brock University St. Catherines yes
8 Cambrian College Sudbury yes
9 Canadian College of Naturopathic Medicine Toronto yes
10 Canadian Memorial Chiropractic College Toronto yes
11 Canadore College of Applied Arts and Technology North Bay yes
12 Carleton University Ottawa yes
13 Centennial College of Applied Arts and Technology Scarborough yes
14 Charles Sturt University, Ontario Campus Burlington yes
15 College Boreal Sudbury yes
16 College Dominicain Ottawa yes
17 Ottawa
College Universitaire Dominicain / Dominican University College yes
18 Conestoga College of Applied Arts and Technology Kitchener yes
19 Confederation College of Applied Arts and Technology Thunder Bay yes
20 Durham College of Applied Arts and Technology Oshawa yes
21 Emmanuel Bible College Kitchener yes
22 Fanshawe College London yes
23 George Brown College 'The City College' Toronto yes
Barrie, Orillia,
Georgian College of Applied Arts and Technology
24 Owen Sound yes
25 Heritage College and Seminary Cambridge yes
26 Humber College of Applied Arts and Technology Toronto yes
27 Institute for Christian Studies Toronto no
28 La Cité collègiale Ottawa yes
29 Lakehead University Thunder Bay yes
30 Lambton College of Applied Arts and Technology Sarnia yes
31 Laurentian University Sudbury yes
32 Loyalist College of Applied Arts and Technology Belleville yes
33 Master's College and Seminary Toronto yes
34 McMaster University Hamilton yes
35 Michener Institute for Applied Health Sciences Toronto yes
Hamilton, Brantford,
Mohawk College of Applied Arts and Technology
36 & Stoney Creek yes
Welland, Niagra Falls,
Niagara College of Applied Arts and Technology
37 & Niagara-on-the-Lake yes
38 Nipissing University North Bay yes
39 Northern College of Applied Arts and Technology Timmins yes
40 Ontario College of Art and Design Toronto yes
41 Queen's University Kingston yes
42 RCC Technology Institute Concord yes
43 Redeemer University College Ancaster yes
44 Royal Military College of Canada Kingston no
45 Ryerson University Toronto yes
46 Saint Paul University / Université Saint-Paul Ottawa yes
47 Sault College of Applied Arts and Technology Saulte Ste. Marie yes
48 Seneca College of Applied Arts and Technology Toronto yes
Brampton, Mississauaga,
Sheridan College of Applied Arts and Technology
49 & Oakville yes
Page 78 of 128
- INNOVATIVE ENERGY SOLUTIONS –
Sir Sandford Fleming College of Applied Arts and
Peterborough, Haliburton,
Technology
50 Lindsay, & Cobourg yes
51 St. Augustine's Seminary Scarborough no
Windsor, Chatham,
St. Clair College of Applied Arts and Technology
52 & Wallaceburg yes
Brockville, Cornwall,
St. Lawrence College
53 & Kingston yes
54 St. Peter's Seminary London
55 Toronto Baptist Seminary and Bible College Toronto yes
56 Toronto School of Theology Toronto no
57 Trent University Peterborough no
58 Tyndale University College and Seminary Toronto yes
59 University of Toronto at Mississauga Mississauaga yes
60 University of Toronto at Scarborough Scarborough yes
61 University of Waterloo Waterloo yes
62 University of Guelph Guelph yes
Université de Hearst Hearst, Kapuskasing,
63 & Timmins no
64 University of Ontario Institute of Technology Oshawa
65 University of Western Ontario London yes
66 University of Windsor Windsor yes
67 Waterloo Lutheran Seminary Waterloo
68 Wilfrid Laurier University Waterloo yes
69 York University Toronto yes
70 University of Ottawa Ottawa yes
Table 6 – Health Care Establishments
Number of Employer Establishments - Health Care
Area Employers Indeterminate Total % of Canada
Ontario 31317 7786 39103 37%
Canada 87449 19735 107184 100%
Table 7 – Health Care Establishments by Size
Number of Employer Establishments by Size - Health Care
Micro 1-
Area 4 Small 4-49 Medium 50-499 Large 500+
Ontario 17695 11984 1485 153
Canada 48588 34375 4107 379
% In Ontario 36% 35% 36% 40%
Page 79 of 128
- INNOVATIVE ENERGY SOLUTIONS –
Table 8 – Growth # of Hospitals in Canada
Year 2003 2003 2003 2003 2003 2003
Hospitals and
clinics in Canada 1067 1068 1068 1069 1070 1070.7
Table 9 – Ontario Hospitals
Group A Hospitals – General / Teaching
1) HAMILTON HAMILTON HEALTH SCIENCES CORPORATION
- Chedoke Hospital Site
- Hamilton General Hospital Site
- Henderson General Hospital Site
- McMaster University Medical Centre Site
2) HAMILTON ST. JOSEPH'S HEALTHCARE, HAMILTON
- St. Joseph's Hospital Site
3) KINGSTON KINGSTON GENERAL HOSPITAL
4) KINGSTON RELIGIOUS HOSPITALLERS OF SAINT JOSEPH OF THE HÔTEL DIEU OF KINGSTON
HÔTEL DIEU HOSPITAL
5) LONDON LONDON HEALTH SCIENCES CENTRE
- South Street Site
- University Site
- Victoria – Westminster Site
6) LONDON ST. JOSEPH'S HEALTH CARE, LONDON
- Parkwood Site
St. Joseph's Health Centre Site
Regional Mental Health Care , London
Regional Mental Health Care , St. Thomas
7) OTTAWA CHILDREN'S HOSPITAL OF EASTERN ONTARIO
8) OTTAWA THE OTTAWA HOSPITAL / L'HÔPITAL D'OTTAWA
- Civic Campus
- General Campus
- The University of Ottawa Heart Institute Site
(Note : Operates under its own legislation but is not legally recognized as a public hospital.)
9) TORONTO MOUNT SINAI HOSPITAL
10) TORONTO ST. MICHAEL'S HOSPITAL
- St. Michael's Site
Page 80 of 128
- INNOVATIVE ENERGY SOLUTIONS –
11) TORONTO SUNNYBROOK HEALTH SCIENCES CENTRE
- Orthopedic and Arthritic Hospital Site
- Sunnybrook Hospital Site
12) TORONTO THE HOSPITAL FOR SICK CHILDREN
13) TORONTO UNIVERSITY HEALTH NETWORK
- Ontario Cancer Institute/Princess Margaret Hospital Site
- Toronto General Hospital Site
- Toronto Western Hospital Site
14) TORONTO WOMEN'S COLLEGE HOSPITAL
Group A Hospitals – Greater than 200 beds
1) AJAX ROUGE VALLEY HEALTH SYSTEM
- Ajax and Pickering Health Centre Site
2) BARRIE THE ROYAL VICTORIA HOSPITAL OF BARRIE
3) BELLEVILLE QUINTE HEALTHCARE CORPORATION
- Belleville Site
4) BRAMPTON WILLIAM OSLER HEALTH CENTRE
- Brampton Site
5) BRANTFORD THE BRANTFORD GENERAL HOSPITAL
6) BROCKVILLE BROCKVILLE GENERAL HOSPITAL
7) BURLINGTON JOSEPH BRANT MEMORIAL HOSPITAL CORPORATION
8) CAMBRIDGE CAMBRIDGE MEMORIAL HOSPITAL
9) CHATHAM ST. JOSEPH'S HEALTH SERVICES ASSOCIATION OF CHATHAM, INCORPORATED
10) CHATHAM THE PUBLIC GENERAL HOSPITAL SOCIETY OF CHATHAM
11) COBOURG THE NORTHUMBERLAND HEALTH CARE CORPORATION
- Cobourg Site
12) CORNWALL CORNWALL COMMUNITY HOSPITAL
- McConnell Avenue Site
- Second Street Site
Page 81 of 128
- INNOVATIVE ENERGY SOLUTIONS –
14) GUELPH THE GUELPH GENERAL HOSPITAL
15) KENORA LAKE OF THE WOODS DISTRICT HOSPITAL
16) KITCHENER GRAND RIVER HOSPITAL CORPORATION
- Kitchener-Waterloo Health Centre Site
17) KITCHENER ST. MARY'S GENERAL HOSPITAL
18) LINDSAY THE ROSS MEMORIAL HOSPITAL
19) MARKHAM MARKHAM STOUFFVILLE HOSPITAL
20) MISSISSAUGA THE CREDIT VALLEY HOSPITAL
21) MISSISSAUGA TRILLIUM HEALTH CENTRE
- Mississauga Site
22) NEWMARKET SOUTHLAKE REGIONAL HEALTH CENTRE
23) NIAGARA FALLS NIAGARA HEALTH SYSTEM
- Greater Niagara General Site
24) NORTH BAY NORTH BAY GENERAL HOSPITAL
- Scollard Site
- Maclaren Site
25) OAKVILLE HALTON HEALTHCARE SERVICES CORPORATION
- Oakville Site
26) ORANGEVILLE HEADWATERS HEALTH CARE CENTRE
- Orangeville Site
27) ORILLIA ORILLIA SOLDIERS' MEMORIAL HOSPITAL
28) OSHAWA LAKERIDGE HEALTH CORPORATION
- Oshawa Site
29) OTTAWA HÔPITAL MONTFORT
30) OTTAWA QUEENSWAY-CARLETON HOSPITAL
31) OWEN SOUND GREY BRUCE HEALTH SERVICES
Page 82 of 128
- INNOVATIVE ENERGY SOLUTIONS –
- Owen Sound Site
32) PEMBROKE PEMBROKE REGIONAL HOSPITAL INC.
33) PETERBOROUGH PETERBOROUGH REGIONAL HEALTH CENTRE
- PRHC Hospital Drive Site
- PRHC Rogers Street Site
34) RICHMOND HILL YORK CENTRAL HOSPITAL
35) ST. CATHARINES NIAGARA HEALTH SYSTEM
- St. Catharines General Site
36) ST. THOMAS THE ST. THOMAS - ELGIN GENERAL HOSPITAL
37) SARNIA LAMBTON HOSPITALS GROUP
- Sarnia General Site
- Charlotte Eleanor Englehart Site
38) SAULT STE. MARIE SAULT AREA HOSPITAL
- Sault Area Hospital Site
- The Plummer Memorial Public Hospital Site
39) SIMCOE NORFOLK GENERAL HOSPITAL
40) STRATFORD STRATFORD GENERAL HOSPITAL
41) SUDBURY HÔPITAL RÉGIONAL DE SUDBURY REGIONAL HOSPITAL
- Laurentian Site
- Memorial Site
- St. Joseph's Health Centre Site
42) THUNDER BAY THUNDER BAY REGIONAL HEALTH SCIENCES CENTRE
43) TIMMINS TIMMINS AND DISTRICT HOSPITAL L'HÔPITAL DE TIMMINS ET DU DISTRICT
44) TORONTO HUMBER RIVER REGIONAL HOSPITAL
- Church Street Site
- Finch Avenue Site
- Keele Street Site
45) TORONTO ROUGE VALLEY HEALTH SYSTEM
- Centenary Health Centre Site
46) TORONTO THE SCARBOROUGH HOSPITAL
- General Division Site
Page 83 of 128
- INNOVATIVE ENERGY SOLUTIONS –
- Grace Division Site
47) TORONTO WILLIAM OSLER HEALTH CENTRE
- Etobicoke Site
48) TORONTO THE TORONTO EAST GENERAL HOSPITAL
49) TORONTO ST. JOSEPH'S HEALTH CENTRE
50) TORONTO NORTH YORK GENERAL HOSPITAL
- General Division Site
- Branson Division Site
51) WELLAND NIAGARA HEALTH SYSTEM
- Welland Hospital Site
52) WINDSOR HÔTEL-DIEU GRACE HOSPITAL
- Hôtel Dieu Site
- Grace Site
53) WINDSOR WINDSOR REGIONAL HOSPITAL
- Metropolitan Site
- Western Site
54) WOODSTOCK WOODSTOCK GENERAL HOSPITAL
Table 10 – Ontario Health Regions
Page 84 of 128
- INNOVATIVE ENERGY SOLUTIONS –
Table 11 – Hotel Establishments
Page 85 of 128
- INNOVATIVE ENERGY SOLUTIONS –
Number of Employer Establishments in Canada by Employment Size Category and Region
Accommodation and Food Services (NAICS 72)
June 2008
Province/Territory Employers Non-Employers/Indeterminate Total % of Canada
Alberta 8,163 2,979 11,142 10.6%
British Columbia 11,593 4,435 16,028 15.3%
Manitoba 2,299 646 2,945 2.8%
New Brunswick 1,819 443 2,262 2.2%
Newfoundland and Labrador 1,335 316 1,651 1.6%
Northwest Territories 105 52 157 0.1%
Nova Scotia 2,063 670 2,733 2.6%
Nunavut 36 16 52 0.0%
Ontario 25,216 13,904 39,120 37.3%
Prince Edward Island 420 135 555 0.5%
Quebec 18,617 6,350 24,967 23.8%
Saskatchewan 2,266 739 3,005 2.9%
Yukon Territory 146 60 206 0.2%
CANADA 74,078 30,745 104,823 100%
Percent Distribution * 70.7% 29.3% 100%
Notes:
*May not add up perfectly due to rounding
Source: Statistics Canada, Canadian Business Patterns Database, June 2008
Table 12 – Hotel Establishments by Size
Number of Establishments in Canada by Employment Size Category and Region
Accommodation and Food Services (NAICS 72)
June 2008
Employment Size Category
(Number of employees)
Province or Territory
Micro Small Medium Large
1-4 5-49 50-499 500+
Alberta 1,848 5,514 787 14
British Columbia 2,932 7,607 1,036 18
Manitoba 502 1,562 235 0
New Brunswick 560 1,166 93 0
Newfoundland and Labrador 559 723 53 0
Northwest Territories 21 78 6 0
Nova Scotia 636 1,299 127 1
Nunavut 9 26 1 0
Ontario 7,767 15,324 2,092 33
Prince Edward Island 126 256 38 0
Quebec 5,426 12,236 941 14
Saskatchewan 567 1,523 176 0
Yukon Territory 37 100 9 0
CANADA 20,990 47,414 5,594 80
Percent Distribution * 28.3% 64.0% 7.6% 0.1%
Page 86 of 128
- INNOVATIVE ENERGY SOLUTIONS –
Number of Establishments in Canada by Employment Size Category and Region
Accommodation and Food Services (NAICS 72)
June 2008
Employment Size Category
(Number of employees)
Province or Territory
Micro Small Medium Large
1-4 5-49 50-499 500+
Notes:
*May not add up perfectly due to rounding
Source: Statistics Canada, Canadian Business Patterns Database, June 2008
Table 13 – Hotel Investments
Annual Capital Investment By Type of Asset
Accommodation and Food Services Sector (NAICS 72)
Value in $ billions CAGR* % Change
Type of Asset 1998-2007 2006-2007
1998 2007
Machinery and Equipment 722.2 963.6 2.9% 2.0%
Construction 831.9 1.8 8.3% 3.9%
Total 1.6 2.8 6.1% 3.2%
Notes:
Totals may not add up perfectly due to rounding.
* Compound annual growth rate.
Source: Statistics Canada, Fixed Capital Flows and Stocks.
Table 14 – Hotel Concentration
120
100
80
60
40
20
0
Atikokan
Cochrane
Lansdowne
Sudbury
Englehart
Mactier
Ajax
Minden
New Hamburg
Bayfield
Pickle Lake
Washago
Cambridge
Kemptville
Parry Sound
Gloucester
Utterson
Brantford
Ingersoll
Port Perry
Renfrew
Windermere
Guelph
Schreiber
St. Catharines
Odessa
Thunder Bay
Deux Rivieres
Massey
Table 15 – Ontario Hotel Locations
Page 87 of 128
- INNOVATIVE ENERGY SOLUTIONS –
Type Description
City Center Generally located in the heart of city within a short distance from business center,
shopping arcade. Rates are normally high due to their location advantages. They have
high traffic on weekdays and the occupancy is generally high.
Motels They are located primarily on highways, they provide lodging to highway travelers and
also provide ample parking space. The length of stay is usually overnight.
Suburban hotels They are located in suburban areas, it generally have high traffic on weekend. It is ideal
for budget travelers. In this type of hotel rates are moderately low.
Airport hotels These hotels are set up near by the airport. They have transit guest who stay over
between flights.
Resort hotels They are also termed as health resort or beach hill resort and so depending on their
position and location. They cater a person who wants to relax, enjoy themselves at hill
station. Most resort work to full capacity during peak season. Sales and revenue
fluctuate from season to season.
Floating hotels As name implies these hotels are established on luxury liners or ship. It is located on
river, sea or big lakes. In cruise ships, rooms are generally small and all furniture is
fixed down. It has long stay guest.
Boatels A house boat hotel is referred as boatels. The shikaras of Kashmir and kettuvallam of
kerala are houseboats in India which offers luxurious accommodation to travelers.
Rotels These novel variants are hotel on wheel. Our very own "palace on wheels" and "Deccan
Odessey" are trains providing a luxurious hotel atmosphere. Their interior is done like
hotel room. They are normally used by small group of travelers.
Source: http://hotel-industry.learnhub.com/lesson/8842-classification-of-hotels
Table 16 – Hotel Size
Type Description
Small hotels 100 rooms or less.
Medium-sized hotels 100-300 rooms.
Large hotels More than 300 rooms.
Mega hotels More than 1,000 rooms.
Chain hotels These group of hotels have hotels in many locations.
Source: http://hotel-industry.learnhub.com/lesson/8842-classification-of-hotels
Page 88 of 128
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Table 17 – Hotel Service
Type Description
Economy / Budget hotels These hotels meet the basic need of the guest by providing comfortable and clean
room for a comfortable stay.
Mid market hotels It is suite hotel that offers small living room with appropriate furniture and small bed
room with king-sized bed.
Luxury hotels These offer world class service providing restaurant and lounges, concierge service,
meeting rooms, dining facilities. Bath linen is provided to the guest and is replaced
accordingly. These guest rooms contains furnishing, artwork etc. prime market for
these hotels are celebrities, business executives and high ranking political figures.
Example: Hyatt Regency, New Delhi.
Source: http://hotel-industry.learnhub.com/lesson/8842-classification-of-hotels
Table 18 – Hotel Stay
Type Description
Transient hotel These are the hotel where guest stays for a day or even less, they are usually five star
hotels. The occupancy rate is usually very high. These hotels are situated near airport.
Residential hotels These are the hotel where guest can stay for a minimum period of one month and up to
a year. The rent can be paid on monthly or quarterly basis. They provide sitting room,
bed room and kitchenette.
Semi residential hotels These hotels incorporate features of both transient and residential hotel.
Source: http://hotel-industry.learnhub.com/lesson/8842-classification-of-hotels
Table 19 – Hotel Themes
Type Description
Heritage hotel In this hotel a guest is graciously welcomed, offered room that have their own history,
serve traditional cuisine and are entertained by folk artist. These hotels put their best
efforts to give the glimpse of their region. Example: Jai Mahal palace in Jaipur.
Ecotels These are environment friendly hotels these hotel use eco friendly items in the room.
Example: Orchid Mumbai is Asia first and most popular five star ecotel.
Boutique hotels This hotel provides exceptional accommodation, furniture in a themed and stylish
manner and caters to corporate travelers. Example: In India the park Bangalore is a
boutique hotel.
Spas Is a resort which provide therapeutic bath and massage along with other features of
luxury hotels in India Ananda spa in Himalaya are the most popular Spa.
Source: http://hotel-industry.learnhub.com/lesson/8842-classification-of-hotels
Table 20 – Hotel Lifestyles
Page 89 of 128
- INNOVATIVE ENERGY SOLUTIONS –
Type Description
Commercial hotel They are situated in the heart of the city in busy commercial areas so as to get good and high
business. They cater mostly businessmen.
Convention hotels These hotels have large convention complex and cater to people attending a convention,
conference
Resort hotels These leisure hotels are mainly for vacationers who want to relax and enjoy with their
family. The occupancy varies as per season. The atmosphere is more relaxed. These are
spread out in vast areas so many resorts have solar powered carts for the transport of guest.
Suite hotels These hotel offer rooms that may include compact kitchenette. They cater to people who are
relocating act as like lawyers, executives who are away from home for a long business stay.
Casino hotels Hotel with predominantly gambling facilities comes under this category, they have guest
room and food and operation too. These hotels tend to cater leisure and vacation travelers.
Gambling activities at some casino hotels operate 24 hours a day and 365 days a year.
Source: http://hotel-industry.learnhub.com/lesson/8842-classification-of-hotels
Page 90 of 128
- INNOVATIVE ENERGY SOLUTIONS –
Table 21 – Number of Hotels in Ontario
NUMBER OF HOTELS/MOTELS IN ONTARIO
Source: http://www.ontario.worldweb.com/WheretoStay/HotelsMotels//index.html
#of Less than
City Hotels 10 > 20 > 30 > 40 > 50 > 60 > 70 > 80 > 90 > 100
Ajax 2 yes 1 no no no no no no no no no
Aurora 2 yes 1 no no no no no no no no no
Algonquin 72 no yes 1 yes 1 yes 1 yes 1 yes 1 yes 1 no no no
Alliston 1 yes 1 no no no no no no no no no
Ancaster 1 yes 1 no no no no no no no no no
Angus 1 yes 1 no no no no no no no no no
Armstrong 1 yes 1 no no no no no no no no no
Arnprior 3 yes 1 no no no no no no no no no
Atikokan 2 yes 1 no no no no no no no no no
Bala 3 yes 1 no no no no no no no no no
Balm Beach 2 yes 1 no no no no no no no no no
Balmertown 2 yes 1 no no no no no no no no no
Bancroft 3 yes 1 no no no no no no no no no
Barrie 19 no no no no no no no no no no
Barry's Bay 2 yes 1 no no no no no no no no no
Batchawana Bay 1 yes 1 no no no no no no no no no
Bayfield 2 yes 1 no no no no no no no no no
Bellville 9 yes 1 no no no no no no no no no
Bewdley 1 yes 1 no no no no no no no no no
Blind River 1 yes 1 no no no no no no no no no
Bobcaygeon 5 yes 1 no no no no no no no no no
Bowmanville 2 yes 1 no no no no no no no no no
Bracebridge 9 yes 1 no no no no no no no no no
Brampton 9 yes 1 no no no no no no no no no
Brantford 7 yes 1 no no no no no no no no no
Brighton 2 yes 1 no no no no no no no no no
Brockville 6 yes 1 no no no no no no no no no
Buckhorn 1 yes 1 no no no no no no no no no
Burlington 14 no no no no no no no no no no
Calabogie 4 yes 1 no no no no no no no no no
Caledon 1 yes 1 no no no no no no no no no
Callander 1 yes 1 no no no no no no no no no
Cambridge 9 yes 1 no no no no no no no no no
Campbellford 2 yes 1 no no no no no no no no no
Campbellville 1 yes 1 no no no no no no no no no
Carleton Place 3 yes 1 no no no no no no no no no
Chapleau 1 yes 1 no no no no no no no no no
Chatham-Kent 10 no no no no no no no no no no
Clinton 1 yes 1 no no no no no no no no no
Cobourg 5 yes 1 no no no no no no no no no
Cochrane 5 yes 1 no no no no no no no no no
Collingwood 11 no no no no no no no no no no
Concord 1 yes 1 no no no no no no no no no
Cookstown 1 yes 1 no no no no no no no no no
Cornwall 14 no no no no no no no no no no
Crystal Beach 1 yes 1 no no no no no no no no no
Deep River 3 yes 1 no no no no no no no no no
Deseronto 1 yes 1 no no no no no no no no no
Deux Rivieres 1 yes 1 no no no no no no no no no
Doorset 1 yes 1 no no no no no no no no no
Dryden 6 yes 1 no no no no no no no no no
Dunnville 2 yes 1 no no no no no no no no no
Dwight 5 yes 1 no no no no no no no no no
Ear Falls 2 yes 1 no no no no no no no no no
Eganville 1 yes 1 no no no no no no no no no
Elmvale 1 yes 1 no no no no no no no no no
Englehart 1 yes 1 no no no no no no no no no
Flesherton 1 yes 1 no no no no no no no no no
Fort Erie 5 yes 1 no no no no no no no no no
Fort Frances 6 yes 1 no no no no no no no no no
Fort Severn 1 yes 1 no no no no no no no no no
French River 1 yes 1 no no no no no no no no no
Gananoque 9 yes 1 no no no no no no no no no
Georgetown 1 yes 1 no no no no no no no no no
Gloucester 1 yes 1 no no no no no no no no no
Goderich 7 yes 1 no no no no no no no no no
Golden Lake 1 yes 1 no no no no no no no no no
Page 91 of 128
- INNOVATIVE ENERGY SOLUTIONS –
Goulais River,ON 1 yes 1 no no no no no no no no no
Grand Bend 4 yes 1 no no no no no no no no no
Gravenhurst 8 yes 1 no no no no no no no no no
Greenstone 1 yes 1 no no no no no no no no no
Grimsby 3 yes 1 no no no no no no no no no
Guelph 13 no no no no no no no no no no
Haliburton 1 yes 1 no no no no no no no no no
Hamilton 17 no no no no no no no no no no
Hanover 2 yes 1 no no no no no no no no no
Hawkesbury 4 yes 1 no no no no no no no no no
Hearst 2 yes 1 no no no no no no no no no
Huntsville 16 no no no no no no no no no no
Ignace 4 yes 1 no no no no no no no no no
Ingersoll 2 yes 1 no no no no no no no no no
Iroquois 1 yes 1 no no no no no no no no no
Ivy Lea 1 yes 1 no no no no no no no no no
Jackson's Point 1 yes 1 no no no no no no no no no
Jordan 1 yes 1 no no no no no no no no no
Kanata 4 yes 1 no no no no no no no no no
Kapuskasing 2 yes 1 no no no no no no no no no
Keewatin 1 yes 1 no no no no no no no no no
Kemptville 2 yes 1 no no no no no no no no no
Kenora 7 yes 1 no no no no no no no no no
Killarney 1 yes 1 no no no no no no no no no
Kincardine 3 yes 1 no no no no no no no no no
Kingston 29 no yes 1 no no no no no no no no
Kingsville 1 yes 1 no no no no no no no no no
Kirkland Lake 2 yes 1 no no no no no no no no no
Kitchener-Waterloo 19 no no no no no no no no no no
Lansdowne 2 yes 1 no no no no no no no no no
Leamington 6 yes 1 no no no no no no no no no
Lindsay 2 yes 1 no no no no no no no no no
Lions Head 2 yes 1 no no no no no no no no no
Lively 1 yes 1 no no no no no no no no no
London 29 no yes 1 no no no no no no no no
Long Lake 1 yes 1 no no no no no no no no no
Mackey 1 yes 1 no no no no no no no no no
Mactier 2 yes 1 no no no no no no no no no
Madoc 2 yes 1 no no no no no no no no no
Manitoulin Island 3 yes 1 no no no no no no no no no
Marathon 4 yes 1 no no no no no no no no no
Markdale 4 yes 1 no no no no no no no no no
Markham 1 yes 1 no no no no no no no no no
Marmora 1 yes 1 no no no no no no no no no
Marten River 2 yes 1 no no no no no no no no no
Massey 2 yes 1 no no no no no no no no no
Mattawa 1 yes 1 no no no no no no no no no
McKellar 1 yes 1 no no no no no no no no no
Meaford 4 yes 1 no no no no no no no no no
Merrickville 1 yes 1 no no no no no no no no no
Midland 7 yes 1 no no no no no no no no no
Milton 2 yes 1 no no no no no no no no no
Minaki 1 yes 1 no no no no no no no no no
Minden 6 yes 1 no no no no no no no no no
Mississauga 47 no yes 1 yes 1 yes 1 no no no no no no
Moosonee 2 yes 1 no no no no no no no no no
Morrisburg 2 yes 1 no no no no no no no no no
Mt. Hope 1 yes 1 no no no no no no no no no
Napanee 5 yes 1 no no no no no no no no no
Nepean 2 yes 1 no no no no no no no no no
Nestor Falls 1 yes 1 no no no no no no no no no
New Hamburg 1 yes 1 no no no no no no no no no
Newmarket 3 yes 1 no no no no no no no no no
Niagara Falls 110 no yes 1 yes 1 yes 1 yes 1 yes 1 yes 1 yes 1 yes 1 yes 1
Niagara-on-the-Lake 11 no no no no no no no no no no
Nipigon 4 yes 1 no no no no no no no no no
Noelville 1 yes 1 no no no no no no no no no
North Bay 18 no no no no no no no no no no
Oakville 12 no no no no no no no no no no
Odessa 1 yes 1 no no no no no no no no no
Orangeville 5 yes 1 no no no no no no no no no
Orillia 10 no no no no no no no no no no
Oshawa 6 yes 1 no no no no no no no no no
Ottawa 57 no yes 1 yes 1 yes 1 yes 1 no no no no no
Owen Sound 9 yes 1 no no no no no no no no no
Paris 1 yes 1 no no no no no no no no no
Parkhill 1 yes 1 no no no no no no no no no
Parry Sound 9 yes 1 no no no no no no no no no
Pelee Island 2 yes 1 no no no no no no no no no
Pelham 1 yes 1 no no no no no no no no no
Page 92 of 128
- INNOVATIVE ENERGY SOLUTIONS –
Pembroke 5 yes 1 no no no no no no no no no
Perth 5 yes 1 no no no no no no no no no
Petawawa 1 yes 1 no no no no no no no no no
Peterborough 13 no no no no no no no no no no
Pickering 2 yes 1 no no no no no no no no no
Pickle Lake 2 yes 1 no no no no no no no no no
Picton 3 yes 1 no no no no no no no no no
Port Carling 2 yes 1 no no no no no no no no no
Port Colborne 4 yes 1 no no no no no no no no no
Port Dover 1 yes 1 no no no no no no no no no
Port Elgin 7 yes 1 no no no no no no no no no
Port Hope 2 yes 1 no no no no no no no no no
Port Loring 1 yes 1 no no no no no no no no no
Port Perry 1 yes 1 no no no no no no no no no
Port Severn 1 yes 1 no no no no no no no no no
Port Sydney 2 yes 1 no no no no no no no no no
Powassan 1 yes 1 no no no no no no no no no
Prescott 1 yes 1 no no no no no no no no no
Prince Edward County 3 yes 1 no no no no no no no no no
Rainy River 1 yes 1 no no no no no no no no no
Red Lake 2 yes 1 no no no no no no no no no
Renfrew 3 yes 1 no no no no no no no no no
Richards Landing 1 yes 1 no no no no no no no no no
Richmond Hill 4 yes 1 no no no no no no no no no
Ridgetown 1 yes 1 no no no no no no no no no
Sarnia 14 no no no no no no no no no no
Sauble Beach 5 yes 1 no no no no no no no no no
Sault Ste. Marie 18 no no no no no no no no no no
Savant Lake 1 yes 1 no no no no no no no no no
Schreiber 2 yes 1 no no no no no no no no no
Sherkston 1 yes 1 no no no no no no no no no
Simcoe 1 yes 1 no no no no no no no no no
Sioux Lookout 2 yes 1 no no no no no no no no no
Sioux Narrows 1 yes 1 no no no no no no no no no
Smith Falls 5 yes 1 no no no no no no no no no
South Porcupine 1 yes 1 no no no no no no no no no
Southampton 6 yes 1 no no no no no no no no no
St. Catharines 9 yes 1 no no no no no no no no no
St. Jacobs 1 yes 1 no no no no no no no no no
St. Thomas 5 yes 1 no no no no no no no no no
Stokes Bay 1 yes 1 no no no no no no no no no
Stoney Creek 3 yes 1 no no no no no no no no no
Stoufville 1 yes 1 no no no no no no no no no
Stratford 15 no no no no no no no no no no
Sturgeon Falls 6 yes 1 no no no no no no no no no
Sudbury 23 no yes 1 no no no no no no no no
Sundridge 1 yes 1 no no no no no no no no no
Temagami 1 yes 1 no no no no no no no no no
Temiskaming Shores 5 yes 1 no no no no no no no no no
Terrace Bay 1 yes 1 no no no no no no no no no
Thessalon 1 yes 1 no no no no no no no no no
Thornbury 2 yes 1 no no no no no no no no no
Thorold 1 yes 1 no no no no no no no no no
Thunder Bay 17 no no no no no no no no no no
Tillsonburg 4 yes 1 no no no no no no no no no
Timmins 6 yes 1 no no no no no no no no no
Tobermory 11 no no no no no no no no no no
Toronto 114 no yes 1 yes 1 yes 1 yes 1 yes 1 yes 1 yes 1 yes 1 yes 1
Trenton 6 yes 1 no no no no no no no no no
Turkey Point 2 yes 1 no no no no no no no no no
Tweed 1 yes 1 no no no no no no no no no
Utterson 1 yes 1 no no no no no no no no no
Vaughan 8 yes 1 no no no no no no no no no
Vineland 1 yes 1 no no no no no no no no no
Wabigoon 1 yes 1 no no no no no no no no no
Wainfleet 1 yes 1 no no no no no no no no no
Walkerton 1 yes 1 no no no no no no no no no
Wallaceburg 3 yes 1 no no no no no no no no no
Wasaga Beach 24 no yes 1 no no no no no no no no
Washago 1 yes 1 no no no no no no no no no
Wawa 13 no no no no no no no no no no
Welland 4 yes 1 no no no no no no no no no
Westport 1 yes 1 no no no no no no no no no
Whitby 2 yes 1 no no no no no no no no no
White River 2 yes 1 no no no no no no no no no
Whitney 3 yes 1 no no no no no no no no no
Wiarton 6 yes 1 no no no no no no no no no
Windermere 1 yes 1 no no no no no no no no no
Windsor 36 no yes 1 yes 1 no no no no no no no
Woodstock 7 yes 1 no no no no no no no no no
Zurich 1 yes 1 no no no no no no no no no
TOTAL 1356 198 10 6 5 4 3 3 2 2 2
Toronto and Niagara Falls 224 Represent 16.52% of total
Page 93 of 128
- INNOVATIVE ENERGY SOLUTIONS –
Table 22 – Office Buildings in Ontario
NUMBER OF ESTABLISHMENTS IN ONTARIO
Workplaces by Major Industry Group
% of Total
2008 Jan-49 50 - 499 500 + Total (Vertical)
Total 491,238 16,631 666 551,333 100.00%
Primary Industries 46,753 958 19 47,742 8.70%
Manufacturing 24,805 2,445 147 27,495 5.00%
Transportation 16,416 785 12 17,231 3.10%
Communication and Other Utilities 3,125 159 21 3,315 0.60%
Retail and Wholesale 149,090 5,236 116 154,475 28.00%
Financial, Insurance and Real Estate 34,949 970 77 36,027 6.50%
Accommodation, Food, Beverage and Recreation 46,100 881 32 47,025 8.50%
Business Services 104,452 1,932 112 106,519 19.30%
Education 11,130 1,235 12 12,383 2.20%
Health 49,249 1,532 83 50,874 9.20%
Government Services 4,094 445 35 14,147 2.60%
Non-Classified 34,100 6.2
Total Offices 156,693
Table 23 – Office Buildings in Toronto, ON
NUMBER OF ESTABLISHMENTS IN TORONTO CMA
Workplaces by Major Industry Group
% of Total
2008 Jan-49 50 - 499 500 + Total (Vertical)
Total 213,103 7,884 373 242,953 100.00%
Primary Industries 15,987 412 10 16,418 6.80%
Manufacturing 12,367 1,289 65 13,766 5.70%
Transportation 7,264 336 8 7,620 3.10%
Communication and Other Utilities 1,473 92 16 1,588 0.70%
Retail and Wholesale 66,982 2,413 79 69,494 28.60%
Financial, Insurance and Real Estate 16,330 687 59 17,103 7.00%
Accommodation, Food, Beverage and Recreation 16,646 366 13 17,033 7.00%
Business Services 50,160 1,098 75 51,345 21.10%
Education 4,376 573 2 4,953 2.00%
Health 20,381 472 31 20,887 8.60%
Government Services 584 110 15 2,368 1.00%
Non-Classified 20,378 8.40%
Total Offices 70,816
Page 94 of 128
- INNOVATIVE ENERGY SOLUTIONS –
Table 24 – Office Buildings in Hamilton, ON
NUMBER OF ESTABLISHMENTS IN HAMILTON CMA
Workplaces by Major Industry Group
% of Total
2008 Jan-49 50 - 499 500 + Total (Vertical)
Total 25,208 857 25 27,759 100.00%
Primary Industries 2,549 49 1 2,601 9.40%
Manufacturing 1,343 124 9 1,484 5.30%
Transportation 711 39 0 750 2.70%
Communication and Other Utilities 152 8 0 160 0.60%
Retail and Wholesale 7,493 289 4 7,789 28.10%
Financial, Insurance and Real Estate 1,848 53 0 1,901 6.80%
Accommodation, Food, Beverage and Recreation 2,296 33 1 2,330 8.40%
Business Services 5,155 76 5 5,237 18.90%
Education 562 58 0 620 2.20%
Health 2,926 104 4 3,034 10.90%
Government Services 123 23 1 433 1.60%
Non-Classified 1,420 5.10%
Total Offices 7,571
Table 25 – Office Buildings in Kitchener, ON
NUMBER OF ESTABLISHMENTS IN KITCHENER CMA
Workplaces by Major Industry Group
% of Total
2008 Jan-49 50 - 499 500 + Total (Vertical)
Total 17,100 695 38 18,833 100.00%
Primary Industries 1,635 47 2 1,684 8.90%
Manufacturing 1,177 148 14 1,346 7.10%
Transportation 455 35 0 490 2.60%
Communication and Other Utilities 93 5 0 99 0.50%
Retail and Wholesale 5,083 233 5 5,322 28.30%
Financial, Insurance and Real Estate 1,270 28 5 1,303 6.90%
Accommodation, Food, Beverage and Recreation 1,555 25 0 1,580 8.40%
Business Services 3,550 58 6 3,614 19.20%
Education 355 42 1 398 2.10%
Health 1,793 57 3 1,853 9.80%
Government Services 100 16 2 313 1.70%
Non-Classified 831 4.40%
Total Offices 5,230
Page 95 of 128
- INNOVATIVE ENERGY SOLUTIONS –
Table 26 – Office Buildings in Oshawa, ON
NUMBER OF ESTABLISHMENTS IN OSHAWA CMA
Workplaces by Major Industry Group
% of Total
2008 Jan-49 50 - 499 500 + Total (Vertical)
Total 9,385 295 11 10,416 100.00%
Primary Industries 1,096 17 0 1,113 10.70%
Manufacturing 333 23 3 361 3.50%
Transportation 255 14 0 269 2.60%
Communication and Other Utilities 48 4 0 52 0.50%
Retail and Wholesale 2,796 103 1 2,900 27.80%
Financial, Insurance and Real Estate 690 20 0 710 6.80%
Accommodation, Food, Beverage and Recreation 1,004 14 0 1,018 9.80%
Business Services 1,719 19 1 1,739 16.70%
Education 244 39 1 284 2.70%
Health 1,135 26 3 1,164 11.20%
Government Services 49 16 2 206 2.00%
Non-Classified 600 5.80%
Total Offices 2,655
Table 27 – Office Buildings in Guelph, ON
NUMBER OF ESTABLISHMENTS IN GUELPH CMA
Workplaces by Major Industry Group
% of Total
2008 Jan-49 50 - 499 500 + Total (Vertical)
Total 5,208 205 18 5,789 100.00%
Primary Industries 565 11 0 576 9.90%
Manufacturing 283 55 10 350 6.00%
Transportation 124 9 0 133 2.30%
Communication and Other Utilities 28 0 0 28 0.50%
Retail and Wholesale 1,510 63 0 1,573 27.20%
Financial, Insurance and Real Estate 377 5 3 385 6.70%
Accommodation, Food, Beverage and Recreation 466 8 0 474 8.20%
Business Services 1,062 19 2 1,083 18.70%
Education 125 14 0 139 2.40%
Health 613 15 2 630 10.90%
Government Services 37 6 1 148 2.60%
Non-Classified 270 4.70%
Total Offices 1,616
Page 96 of 128
- INNOVATIVE ENERGY SOLUTIONS –
Table 28 – Ontario Energy Efficiency Industry PEST Pro/Con
Pros Cons
Government incentives for eco- Little or no intellectual property
retrofits protection on our products
Political Stable & supportive government
Legislation to encourage eco-
action retrofits
Energy efficiency regulations
No currency exchange risk High manufacturing dependency
Economic Demand to become economically Ontario hit hardest in recession
efficient (lower costs) Low discretionary income
High unemployment rates
Highest population in Canada Product intangible benefit –
Social & Large target market hard to quantify results & has
Shift toward sustainable long payback
Cultural
practices Some cultures may not value
Diversity eco-efficiency
Metered energy rates Difficult to install in old
Technological High technological buildings
advancements
Old buildings
High environmental concern High pollution
High energy consumption
Environmental Extreme high & low
temperatures
High awareness
Competitive Only one direct competitor Growing number of competitors
(based out of California) Saturated market
Page 97 of 128
- INNOVATIVE ENERGY SOLUTIONS –
Table 29 – Target Market Share for each Segment, 3 years
Targeted Market Shares for the 1st Year of Operations
Selling Price per Unit $ 300.00
Short-term Market Segments
Market Annual Market Purhcase
Size Quota Share Quantity per
Student Dorms 60 4 6.67% 50
Extended Care Facilities 4,649 5 0.11% 50
Long-term Market Segments
Market Annual Market
Size Quota Share
Hospitals 153 2 1.31% 30
Hotels 1,356 6 0.44% 100
Office Buildings 156,693 5 0.00% 10
Total 162,911 22 8.5% 1160
Targeted Market Shares for the 2nd Year of Operations
Selling Price per Unit $ 300.00
Short-term Market Segments
Market Annual Market Purhcase Quantity
Size Quota Share per Facility
Student Dorms 60 8 13.33% 50
Extended Care Facilities 4,649 10 0.22% 50
Long-term Market Segments
Market Annual Market
Size Quota Share
Hospitals 153 5 3.27% 30
Hotels 1,356 12 0.88% 100
Office Buildings 156,693 10 0.01% 10
Total 162,911 45 17.7% 2,350
Page 98 of 128
- INNOVATIVE ENERGY SOLUTIONS –
Targeted Market Shares for the 3rd Year of Operations
Selling Price per Unit $ 300.00
Short-term Market Segments
Purhcase
Market Annual Market Quantity per
Size Quota Share Facility
Student Dorms 60 14 23.33% 50
Extended Care Facilities 4,649 16 0.34% 50
Long-term Market Segments
Market Annual Market
Size Quota Share
Hospitals 153 7 4.58% 30
Hotels 1,356 18 1.33% 100
Office Buildings 156,693 16 0.01% 10
Total 162,911 71 29.6% 3670
Page 99 of 128
- INNOVATIVE ENERGY SOLUTIONS –
Table 30 – Forecasted Sales, 2010-2012
Forecasted Sales, year 1
Selling $300 per unit
Short-term Market Segments
Student Dorms $60,000.00
Extended Care Facilities $75,000.00
Potential Sales $135,000.00
Long-term Market Segments
Hosptials $18,000.00
Hotels $180,000.00
Office Buildings $15,000.00
Potential Sales $213,000.00
Forecasted Sales $348,000.00
Forecasted Sales, year 2
Selling $300 per unit Forecasted Sales, year 3
Short-term Market Segments Selling $300 per unit
Student Dorms $120,000.00 Short-term Market Segments
Extended Care Facilities $150,000.00 Student Dorms $210,000.00
Potential Sales $270,000.00 Extended Care Facilities $240,000.00
Potential Sales $450,000.00
Long-term Market Segments
Long-term Market Segments
Hosptials $45,000.00
Hosptials $63,000.00
Hotels $360,000.00 Hotels $540,000.00
Office Buildings $30,000.00 Office Buildings $48,000.00
Potential Sales $435,000.00 Potential Sales $651,000.00
Forecasted Sales $705,000.00 Forecasted Sales $1,101,000.00
Page 100 of 128
- INNOVATIVE ENERGY SOLUTIONS –
Table 31 – Flyer for Retirement Homes
Page 101 of 128
- INNOVATIVE ENERGY SOLUTIONS –
Table 32 – Flyer for Hotels
Page 102 of 128
- INNOVATIVE ENERGY SOLUTIONS –
Table 33 – Total Marketing Budget Costs
Annual Cost, 2010
Marketing Communications
Sponsorship Budget $ 600.00
Flyers $ 4,237.50
Web Marketing (developing online calculator) $ 1,000.00
Do-it-yourself (printing costs for installation instructions)$ 60.00
Pilot Testing (Manufacturing cost $150) $ 4,500.00
Bus Ads $ 9,450.00
Total $ 19,847.50
Table 34 – Marketing Plan Timeline, 2010
Marketing Plan Timeline, 2010
Last updated: July 27 2009
Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Marketing Communications
Sponsorship
Personal Selling
Flyers
Strategic Alliances
Web Marketing
Do-it-yourself
Bus Ads
Channels
Channel communications and training
Page 103 of 128
- INNOVATIVE ENERGY SOLUTIONS –
Table 35 – Porters 5 Force Analysis: Ontario Energy Efficiency Industry
Porter’s Five Forces
Intensity
Bargainin Threat of Bargainin
Factor of Threat of
Factor g power of new g power of
Assessment competitiv substitutes
customers entrants suppliers
e rivalry
Number 12 INCREASE INCREASE DECREASE
and size of competitors
competito (High)
rs
Product Low industry INCREASE INCREASE INCREASE DECREASE
differentia differentiatio
tion n
Customer Low INCREASE INCREASE INCREASE INCREASE
switching
cost
Industry High DECREASE INCREASE INCREASE
growth
Number High & large INCREASE INCREASE
and size of size
customers
Customer High INCREASE
purchase
volume
Barriers to -High Capital DECREASE
entry Start-up
-Proprietary
Technology
High
Substitute High DECREASE
price
performan
ce
tradeoffs
Customer High INCREASE
Inclinatio
n to
Switch
Quality of High DECREASE
Product
Number of High INCREASE
Substitute
Page 104 of 128
- INNOVATIVE ENERGY SOLUTIONS –
s
Number High DECREASE
and size of
suppliers
Cost to Low DECREASE
switch
suppliers
Input High INCREASE
differentia
tion
Company Low INCREASE
or
competito
r purchase
volume
Importanc High INCREASE
e of input
Evaluate the strength of High High High Low Low
each of the forces
Page 105 of 128
- INNOVATIVE ENERGY SOLUTIONS –
Table 36 – Competitor Intelligence Matrix
Canadian
Criteria Energex SPI Systems Happy Building AirGenuity Dimonoff Douglas Lighting Controls
Saint-Jean-sur-Richelieu,
Location of Company Richmond, BC Stouffvill, ON Courtenay, BC QU Lavoisier, QU Vancouver & Montreal
Large - supplier to
Rami said they are Honeywell; international
Size of Company (# Employees) *6-14 not doing so well now locations Very large
Years in Business 17 years 24 years Since 1985, 24 years 10 years 47 years
Computerized
Sensor based products lighting control Thermostats, Relays, Switching & automatic lighting,
which regulate lighting systems, relays, Thermostats, control Regulators, switches; Relays, SENSORS, lighting automated controls, light timers,
& thermostat, based control pannels, & temperature and air every aspect of controls, Systems of computerized systems, sensors,
Product Lines on occupancy software for lighting conditioners lighting/heating controlling lights everything lightings
Very similar sensor lighting
No sensor based Similar, only controls product; does not regulate Very similar, does not adjust
Level of similarity items heat No sensor based items heat, only light heating
Mostly rented
appartments (with
Large & small tenants, building
Hotels & commercial manufacturing manager, and Industrial & commercial & Industrial & commercial &
Primary Product Use buildings facilities building owner) General use Institutional Institutional
Easy to install, saves
energy, fully Differenciator: easy to install,
Special Note customized Subsiduary of Honeywell uses old wiring
Level of Website Marketing Moderate Moderate O.K., not great High Very High Low
Overall Level of Threat NA Moderate/High Moderate Moderate High High
Page 106 of 128
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Table 36 – Competitor Intelligence Matrix (Cont’d)
American
Criteria Energy Eye InnCom Onity Venstar Room Energy
Location of Company San Diego, CA Niantic, CT Duluth, GA Chatsworth, CA
Services both Americas Giant, services 115
Size of Company (# Employees) Moderate and Asia countries Large
Since 1941, 68 years,
but they've been doing
Years in Business 8 years Since 1986, 23 years different stuff
Sensors to control Electronic locks, Thermostats that can
Sensor based system lights, temperature, and electronic in-room be wirelessly
which alters light & humidity; phones, safes, sensor monitored and Wireless occupancy
heat, based on central electronic locks, temperature controls adjusted from an sensor - changes
Product Lines occupancy guest status (wired/wireless) internet device temperature
Very similar, does not
Level of similarity Extreamely similar Similar and even better Just temperature Modertate adjust lights
Education, Hotels,
Hotel-oriented (main Government/Military, Commercial, large
Primary Product Use Mainly hotels customer 5-star hotels) Corporate, Ships/Boats focus on residential Hotels & schools
Distributors all over Residential room kits -
America & International simple & easy
& 1 in Vancouver; 2 in Energy Star & LEED Lots of brand installation; many
Special Note Ontario sertified Energy Star Partner extension certifications
High, trying to be very
Level of Website Marketing High green Sublime High Low
Overall Level of Threat Very High Very High Low Moderate Moderate
Page 107 of 128
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Table 37 – Primary Competitor Matrix
Primary Competitor Qualitative Analysis
Primary Competitors
Criteria/Company Energex InnCom DimOnOff Happy Building Energy Eye
Sensor-based devices
Sensor-based devices regulating light only. Sensor-based devices
Intelligent occupency sensors regulating light, heat, air Distributor & control regulating heat & air Sensor-based devices regulating
Product Function that regulate heat and light conditioning & humidity automation conditioning only light, heat & air conditioning
Location Richmond, BC Niantic, CT Lavoisier, QU Courtenay, BC San Diego, CA
Industry Experience in years 17 23 n/a 24 8
LEED, Environmental Energy Star, GGEC, Green Hotels
Certifications Energy Star Management, Energy Star None None Association
Agents/distributors in US,
Distribution channels Personal Selling/distributors Personal Selling Canada Personal Selling Distributors Internationally
Web contact, subsidiaries in
different areas, engineering
consulting, call
centerEducational courses,
Little information is avaliable onsite training, online Contact request form. 24hr Tesitmoials on web, people Global tech support, warranty
Customer Service online training, warranty response time seem satisfied with products coverage, guest relations
Distributors in Mexico, Seeing distributors for Canada
HongKong, Caribbean, South & USA. Agents in Ontario. 9 US distributors, 3 certified
Has USA sales location and few America, USA, partner in Partner with SPI & Capital Office in Coutenay, planning to installers, 3 Canadian distributors, 16
Distribution Capability disributors Ontario Energy expand nation wide distributors outside of North America
Door sensors, windows, Passive
Intelligent EMU, wired or infrared (PIF), intelligent logic
wireless, PIR or ultrasonic Wireless, phone interface, Relays, Sensors, powerline Motion detector, EMU chi[ that controllers, total energy solution
Technological Attributes sensor customer design products infrastructure, soft touch regulates light, wireless EMU
Industrial, commercial,
Hotels, commercial, institutional, Ontario &
Target Market institutional Hotels Quebec Apartment buildings (rented) Hotels
http://www.energexinc.com/in http://www.inncom.com/inde http://www.happybuilding.co http://www.energy-
Website dex.htm x.php http://www.dimonoff.com/ m/index.html eye.com/indextest.htm
Qualitative Level of Threat NA Very High High Medium High
Page 108 of 128
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Table 38 – Project Timeline/Milestones
Page 109 of 128
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Table 39 – Projected Income Statement, Year 1
MONTH JAN FEB MAR 1ST APR MAY JUNE 2ND JULY AUG SEPT. 3RD OCT NOV DEC 4TH YEAR
QUARTER QUARTER QUARTER QUARTER TOTAL
SALES $43,500 $17,400 $19,140 $80,040 $22,620 $33,060 $22,620 $78,300 $40,020 $33,060 $22,620 $95,700 $20,880 $33,060 $40,020 $93,960 $348,000
Gross Margin $21,750 $8,700 $9,570 $40,020 $11,310 $16,530 $11,310 $39,150 $20,010 $16,530 $11,310 $47,850 $10,440 $16,530 $20,010 $46,980 $174,000
OPERATING EXPENSES
(Controllable)
Salaries $5,220 $2,088 $2,297 $9,605 $2,714 $3,967 $2,714 $9,396 $4,802 $3,967 $2,714 $11,484 $2,506 $3,967 $4,802 $11,275 $41,760
Employee Benefits $16 $16 $16 $47 $16 $16 $16 $47 $16 $16 $16 $47 $16 $16 $16 $47 $186
Advertising $209 $84 $92 $384 $109 $159 $109 $376 $192 $159 $109 $459 $100 $159 $192 $451 $1,670
Other Controllables $435 $174 $191 $800 $226 $331 $226 $783 $400 $331 $226 $957 $209 $331 $400 $940 $3,480
(Non-Controllables)
Corporate Overhead $775 $775 $775 $2,325 $775 $775 $775 $2,325 $775 $775 $775 $2,325 $775 $775 $775 $2,325 $9,300
Rent $2,200 $2,200 $2,200 $6,600 $2,200 $2,200 $2,200 $6,600 $2,200 $2,200 $2,200 $6,600 $2,200 $2,200 $2,200 $6,600 $26,400
Insurance $300 $300 $300 $900 $300 $300 $300 $900 $300 $300 $300 $900 $300 $300 $300 $900 $3,600
Utilities $290 $290 $290 $870 $290 $290 $290 $870 $290 $290 $290 $870 $290 $290 $290 $870 $3,480
Other Non-
Controllables $870 $348 $383 $1,601 $452 $661 $452 $1,566 $800 $661 $452 $1,914 $418 $661 $800 $1,879 $6,960
Total Oper. Exp. $10,314 $6,274 $6,543 $23,132 $7,082 $8,698 $7,082 $22,862 $9,776 $8,698 $7,082 $25,556 $6,813 $8,698 $9,776 $25,287 $96,836
Op. Profit/Loss $11,436 $2,426 $3,027 $16,888 $4,228 $7,832 $4,228 $16,288 $10,234 $7,832 $4,228 $22,294 $3,627 $7,832 $10,234 $21,693 $77,164
Interest Exp. $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Company
Profit/Loss $11,436 $2,426 $3,027 $16,888 $4,228 $7,832 $4,228 $16,288 $10,234 $7,832 $4,228 $22,294 $3,627 $7,832 $10,234 $21,693 $77,164
Taxes $3,431 $728 $908 $5,066 $1,268 $2,350 $1,268 $4,886 $3,070 $2,350 $1,268 $6,688 $1,088 $2,350 $3,070 $6,508 $23,149
Total Company
NET Profit/Loss $8,005 $1,698 $2,119 $11,822 $2,960 $5,482 $2,960 $11,401 $7,164 $5,482 $2,960 $15,606 $2,539 $5,482 $7,164 $15,185 $54,015
Page 110 of 128
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Table 40 – Projected Income Statement, Year 2
MONTH JAN FEB MAR 1ST APR MAY JUNE 2ND JULY AUG SEPT. 3RD OCT NOV DEC 4TH YEAR
QUARTER QUARTER QUARTER QUARTER TOTAL
SALES $88,125 $35,250 $38,775 $162,150 $45,825 $66,975 $45,825 $158,625 $81,075 $66,975 $45,825 $193,875 $42,300 $66,975 $81,075 $190,350 $705,000
Gross Margin $44,063 $17,625 $19,388 $81,075 $22,913 $33,488 $22,913 $79,313 $40,538 $33,488 $22,913 $96,938 $21,150 $33,488 $40,538 $95,175 $352,500
OPERATING EXPENSES
(Controllable)
Salaries $10,575 $4,230 $4,653 $19,458 $5,499 $8,037 $5,499 $19,035 $9,729 $8,037 $5,499 $23,265 $5,076 $8,037 $9,729 $22,842 $84,600
Employee Benefits $16 $16 $16 $47 $16 $16 $16 $47 $16 $16 $16 $47 $16 $16 $16 $47 $186
Advertising $423 $169 $186 $778 $220 $321 $220 $761 $389 $321 $220 $931 $203 $321 $389 $914 $3,384
Other Controllables $881 $353 $388 $1,622 $458 $670 $458 $1,586 $811 $670 $458 $1,939 $423 $670 $811 $1,904 $7,050
(Non-Controllables)
Corporate Overhead $775 $775 $775 $2,325 $775 $775 $775 $2,325 $775 $775 $775 $2,325 $775 $775 $775 $2,325 $9,300
Rent $2,200 $2,200 $2,200 $6,600 $2,200 $2,200 $2,200 $6,600 $2,200 $2,200 $2,200 $6,600 $2,200 $2,200 $2,200 $6,600 $26,400
Insurance $300 $300 $300 $900 $300 $300 $300 $900 $300 $300 $300 $900 $300 $300 $300 $900 $3,600
Utilities $588 $588 $588 $1,763 $588 $588 $588 $1,763 $588 $588 $588 $1,763 $588 $588 $588 $1,763 $7,050
Other Non-
Controllables $1,763 $705 $776 $3,243 $917 $1,340 $917 $3,173 $1,622 $1,340 $917 $3,878 $846 $1,340 $1,622 $3,807 $14,100
Total Oper. Exp. $17,520 $9,335 $9,880 $36,735 $10,972 $14,246 $10,972 $36,189 $16,428 $14,246 $10,972 $41,646 $10,426 $14,246 $16,428 $41,100 $155,670
Op. Profit/Loss $26,543 $8,290 $9,507 $44,340 $11,941 $19,242 $11,941 $43,123 $24,109 $19,242 $11,941 $55,292 $10,724 $19,242 $24,109 $54,075 $196,830
Interest Exp. $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Company
Profit/Loss $26,543 $8,290 $9,507 $44,340 $11,941 $19,242 $11,941 $43,123 $24,109 $19,242 $11,941 $55,292 $10,724 $19,242 $24,109 $54,075 $196,830
Taxes $7,963 $2,487 $2,852 $13,302 $3,582 $5,773 $3,582 $12,937 $7,233 $5,773 $3,582 $16,587 $3,217 $5,773 $7,233 $16,222 $59,049
Total Company
NET Profit/Loss $18,580 $5,803 $6,655 $31,038 $8,359 $13,469 $8,359 $30,186 $16,876 $13,469 $8,359 $38,704 $7,507 $13,469 $16,876 $37,852 $137,781
Page 111 of 128
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Table 41 – Projected Income Statement, Year 3
MONTH JAN FEB MAR 1ST APR MAY JUNE 2ND JULY AUG SEPT. 3RD OCT NOV DEC 4TH YEAR
QUARTER QUARTER QUARTER QUARTER TOTAL
SALES $137,625 $55,050 $60,555 $253,230 $71,565 $104,595 $71,565 $247,725 $126,615 $104,595 $71,565 $302,775 $66,060 $104,595 $126,615 $297,270 $1,101,000
Gross Margin $68,813 $27,525 $30,278 $126,615 $35,783 $52,298 $35,783 $123,863 $63,308 $52,298 $35,783 $151,388 $33,030 $52,298 $63,308 $148,635 $550,500
OPERATING EXPENSES
(Controllable)
Salaries $16,515 $6,606 $7,267 $30,388 $8,588 $12,551 $8,588 $29,727 $15,194 $12,551 $8,588 $36,333 $7,927 $12,551 $15,194 $35,672 $132,120
Employee Benefits $16 $16 $16 $47 $16 $16 $16 $47 $16 $16 $16 $47 $16 $16 $16 $47 $186
Advertising $661 $264 $291 $1,216 $344 $502 $344 $1,189 $608 $502 $344 $1,453 $317 $502 $608 $1,427 $5,285
Other Controllables $1,376 $551 $606 $2,532 $716 $1,046 $716 $2,477 $1,266 $1,046 $716 $3,028 $661 $1,046 $1,266 $2,973 $11,010
(Non-Controllables)
Corporate Overhead $775 $775 $775 $2,325 $775 $775 $775 $2,325 $775 $775 $775 $2,325 $775 $775 $775 $2,325 $9,300
Rent $2,200 $2,200 $2,200 $6,600 $2,200 $2,200 $2,200 $6,600 $2,200 $2,200 $2,200 $6,600 $2,200 $2,200 $2,200 $6,600 $26,400
Insurance $300 $300 $300 $900 $300 $300 $300 $900 $300 $300 $300 $900 $300 $300 $300 $900 $3,600
Utilities $918 $918 $918 $2,753 $918 $918 $918 $2,753 $918 $918 $918 $2,753 $918 $918 $918 $2,753 $11,010
Other Non-
Controllables $2,753 $1,101 $1,211 $5,065 $1,431 $2,092 $1,431 $4,955 $2,532 $2,092 $1,431 $6,056 $1,321 $2,092 $2,532 $5,945 $22,020
Total Oper. Exp. $25,512 $12,730 $13,582 $51,824 $15,286 $20,399 $15,286 $50,972 $23,808 $20,399 $15,286 $59,494 $14,434 $20,399 $23,808 $58,641 $220,931
Op. Profit/Loss $43,300 $14,795 $16,696 $74,791 $20,496 $31,898 $20,496 $72,891 $39,499 $31,898 $20,496 $91,894 $18,596 $31,898 $39,499 $89,994 $329,569
Interest Exp. $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Company
Profit/Loss $43,300 $14,795 $16,696 $74,791 $20,496 $31,898 $20,496 $72,891 $39,499 $31,898 $20,496 $91,894 $18,596 $31,898 $39,499 $89,994 $329,569
Taxes $12,990 $4,439 $5,009 $22,437 $6,149 $9,569 $6,149 $21,867 $11,850 $9,569 $6,149 $27,568 $5,579 $9,569 $11,850 $26,998 $98,871
Total Company
NET Profit/Loss $30,310 $10,357 $11,687 $52,354 $14,347 $22,329 $14,347 $51,023 $27,650 $22,329 $14,347 $64,326 $13,017 $22,329 $27,650 $62,996 $230,698
Page 112 of 128
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Table 42 – Projected Income Statement, Quarterly Summary
Year Year One Year Two Year Three
Quarter Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
SALES $80,040 $78,300 $95,700 $93,960 $162,150 $158,625 $193,875 $190,350 $253,230 $247,725 $302,775 $297,270
Gross Margin $40,020 $39,150 $47,850 $46,980 $81,075 $79,313 $96,938 $95,175 $126,615 $123,863 $151,388 $148,635
OPERATING EXPENSES
(Controllable)
Salaries $9,605 $9,396 $11,484 $11,275 $19,458 $19,035 $23,265 $22,842 $30,388 $29,727 $36,333 $35,672
Employee Benefits $47 $47 $47 $47 $47 $47 $47 $47 $47 $47 $47 $47
Advertising $384 $376 $459 $451 $778 $761 $931 $914 $1,216 $1,189 $1,453 $1,427
Other Controllables $800 $783 $957 $940 $1,622 $1,586 $1,939 $1,904 $2,532 $2,477 $3,028 $2,973
(Non-Controllables)
Corporate Overhead $2,325 $2,325 $2,325 $2,325 $2,325 $2,325 $2,325 $2,325 $2,325 $2,325 $2,325 $2,325
Rent $6,600 $6,600 $6,600 $6,600 $6,600 $6,600 $6,600 $6,600 $6,600 $6,600 $6,600 $6,600
Insurance $900 $900 $900 $900 $900 $900 $900 $900 $900 $900 $900 $900
Utilities $870 $870 $870 $870 $1,763 $1,763 $1,763 $1,763 $2,753 $2,753 $2,753 $2,753
Other Non-
Controllables $1,601 $1,566 $1,914 $1,879 $3,243 $3,173 $3,878 $3,807 $5,065 $4,955 $6,056 $5,945
Total Oper. Exp. $23,132 $22,862 $25,556 $25,287 $36,735 $36,189 $41,646 $41,100 $51,824 $50,972 $59,494 $58,641
Op. Profit/Loss $16,888 $16,288 $22,294 $21,693 $44,340 $43,123 $55,292 $54,075 $74,791 $72,891 $91,894 $89,994
Interest Exp. $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Company
Profit/Loss $16,888 $16,288 $22,294 $21,693 $44,340 $43,123 $55,292 $54,075 $74,791 $72,891 $91,894 $89,994
Taxes $5,066 $4,886 $6,688 $6,508 $13,302 $12,937 $16,587 $16,222 $22,437 $21,867 $27,568 $26,998
Total Company
NET Profit/Loss $11,822 $11,401 $15,606 $15,185 $31,038 $30,186 $38,704 $37,852 $52,354 $51,023 $64,326 $62,996
Page 113 of 128
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Table 43 – Projected Income Statement, Yearly Summary
Year One Two Three
SALES $348,000 $705,000 $1,101,000
Gross Margin $174,000 $352,500 $550,500
OPERATING EXPENSES
(Controllable)
Salaries $41,760 $84,600 $132,120
Employee Benefits $186 $186 $186
Advertising $1,670 $3,384 $5,285
Other Controllables $3,480 $7,050 $11,010
(Non-Controllables)
Corporate Overhead $9,300 $9,300 $9,300
Rent $26,400 $26,400 $26,400
Insurance $3,600 $3,600 $3,600
Utilities $3,480 $7,050 $11,010
Other Non-
Controllables $6,960 $14,100 $22,020
Total Oper. Exp. $96,836 $155,670 $220,931
Op. Profit/Loss $77,164 $196,830 $329,569
Interest Exp. $0 $0 $0
Total Company
Profit/Loss $77,164 $196,830 $329,569
Taxes $23,149 $59,049 $98,871
Total Company
NET Profit/Loss $54,015 $137,781 $230,698
Page 114 of 128
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Table 44 – Projected Income Statement, Quarterly Summary (Optimistic Scenario)
Year Year One Year Two Year Three
Quarter Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
SALES $92,046 $90,045 $110,055 $108,054 $186,473 $182,419 $222,956 $218,903 $291,215 $284,884 $348,191 $341,861
Gross Margin $46,023 $45,023 $55,028 $54,027 $93,236 $91,209 $111,478 $109,451 $145,607 $142,442 $174,096 $170,930
OPERATING EXPENSES
(Controllable)
Salaries $11,046 $10,805 $13,207 $12,966 $22,377 $21,890 $26,755 $26,268 $34,946 $34,186 $41,783 $41,023
Employee Benefits $47 $47 $47 $47 $47 $47 $47 $47 $47 $47 $47 $47
Advertising $442 $432 $528 $519 $895 $876 $1,070 $1,051 $1,398 $1,367 $1,671 $1,641
Other Controllables $920 $900 $1,101 $1,081 $1,865 $1,824 $2,230 $2,189 $2,912 $2,849 $3,482 $3,419
(Non-Controllables)
Corporate Overhead $2,325 $2,325 $2,325 $2,325 $2,325 $2,325 $2,325 $2,325 $2,325 $2,325 $2,325 $2,325
Rent $6,600 $6,600 $6,600 $6,600 $6,600 $6,600 $6,600 $6,600 $6,600 $6,600 $6,600 $6,600
Insurance $900 $900 $900 $900 $900 $900 $900 $900 $900 $900 $900 $900
Utilities $1,001 $1,001 $1,001 $1,001 $2,027 $2,027 $2,027 $2,027 $3,165 $3,165 $3,165 $3,165
Other Non-
Controllables $1,841 $1,801 $2,201 $2,161 $3,729 $3,648 $4,459 $4,378 $5,824 $5,698 $6,964 $6,837
Total Oper. Exp. $25,121 $24,811 $27,909 $27,599 $40,764 $40,137 $46,412 $45,784 $58,117 $57,137 $66,937 $65,957
Op. Profit/Loss $20,902 $20,212 $27,119 $26,428 $52,472 $51,073 $65,066 $63,667 $87,490 $85,305 $107,159 $104,973
Interest Exp. $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Company
Profit/Loss $20,902 $20,212 $27,119 $26,428 $52,472 $51,073 $65,066 $63,667 $87,490 $85,305 $107,159 $104,973
Taxes $6,271 $6,063 $8,136 $7,928 $15,742 $15,322 $19,520 $19,100 $26,247 $25,591 $32,148 $31,492
Total Company
NET Profit/Loss $14,632 $14,148 $18,983 $18,500 $36,730 $35,751 $45,546 $44,567 $61,243 $59,713 $75,011 $73,481
Page 115 of 128
- INNOVATIVE ENERGY SOLUTIONS –
Table 45 – Projected Income Statement, Yearly Summary (Optimistic Scenario)
Year One Two Three
SALES $400,200 $810,750 $1,266,150
Gross Margin $200,100 $405,375 $633,075
OPERATING EXPENSES
(Controllable)
Salaries $48,024 $97,290 $151,938
Employee Benefits $186 $186 $186
Advertising $1,921 $3,892 $6,078
Other Controllables $4,002 $8,108 $12,662
(Non-Controllables)
Corporate Overhead $9,300 $9,300 $9,300
Rent $26,400 $26,400 $26,400
Insurance $3,600 $3,600 $3,600
Utilities $4,002 $8,108 $12,662
Other Non-
Controllables $8,004 $16,215 $25,323
Total Oper. Exp. $105,439 $173,098 $248,148
Op. Profit/Loss $94,661 $232,277 $384,927
Interest Exp. $0 $0 $0
Total Company
Profit/Loss $94,661 $232,277 $384,927
Taxes $28,398 $69,683 $115,478
Total Company
NET Profit/Loss $66,263 $162,594 $269,449
Page 116 of 128
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Table 46 – Projected Income Statement, Quarterly Summary (Pessimistic Scenario)
Year Year One Year Two Year Three
Quarter Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
SALES $68,034 $66,555 $81,345 $79,866 $137,828 $134,831 $164,794 $161,798 $215,246 $210,566 $257,359 $252,680
Gross Margin $34,017 $33,278 $40,673 $39,933 $68,914 $67,416 $82,397 $80,899 $107,623 $105,283 $128,679 $126,340
OPERATING EXPENSES
(Controllable)
Salaries $8,164 $7,987 $9,761 $9,584 $16,539 $16,180 $19,775 $19,416 $25,829 $25,268 $30,883 $30,322
Employee Benefits $47 $47 $47 $47 $47 $47 $47 $47 $47 $47 $47 $47
Advertising $327 $319 $390 $383 $662 $647 $791 $777 $1,033 $1,011 $1,235 $1,213
Other Controllables $680 $666 $813 $799 $1,378 $1,348 $1,648 $1,618 $2,152 $2,106 $2,574 $2,527
(Non-Controllables)
Corporate Overhead $2,325 $2,325 $2,325 $2,325 $2,325 $2,325 $2,325 $2,325 $2,325 $2,325 $2,325 $2,325
Rent $6,600 $6,600 $6,600 $6,600 $6,600 $6,600 $6,600 $6,600 $6,600 $6,600 $6,600 $6,600
Insurance $900 $900 $900 $900 $900 $900 $900 $900 $900 $900 $900 $900
Utilities $740 $740 $740 $740 $1,498 $1,498 $1,498 $1,498 $2,340 $2,340 $2,340 $2,340
Other Non-
Controllables $1,361 $1,331 $1,627 $1,597 $2,757 $2,697 $3,296 $3,236 $4,305 $4,211 $5,147 $5,054
Total Oper. Exp. $21,143 $20,914 $23,203 $22,974 $32,705 $32,242 $36,880 $36,416 $45,531 $44,807 $52,050 $51,326
Op. Profit/Loss $12,874 $12,364 $17,469 $16,959 $36,208 $35,174 $45,517 $44,483 $62,092 $60,476 $76,629 $75,014
Interest Exp. $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Company
Profit/Loss $12,874 $12,364 $17,469 $16,959 $36,208 $35,174 $45,517 $44,483 $62,092 $60,476 $76,629 $75,014
Taxes $3,862 $3,709 $5,241 $5,088 $10,863 $10,552 $13,655 $13,345 $18,627 $18,143 $22,989 $22,504
Total Company
NET Profit/Loss $9,012 $8,655 $12,229 $11,871 $25,346 $24,622 $31,862 $31,138 $43,464 $42,333 $53,640 $52,510
Page 117 of 128
- INNOVATIVE ENERGY SOLUTIONS –
Table 47 – Projected Income Statement, Yearly Summary (Pessimistic Scenario)
Year One Two Three
SALES $295,800 $599,250 $935,850
Gross Margin $147,900 $299,625 $467,925
OPERATING EXPENSES
(Controllable)
Salaries $35,496 $71,910 $112,302
Employee Benefits $186 $186 $186
Advertising $1,420 $2,876 $4,492
Other Controllables $2,958 $5,993 $9,359
(Non-Controllables)
Corporate Overhead $9,300 $9,300 $9,300
Rent $26,400 $26,400 $26,400
Insurance $3,600 $3,600 $3,600
Utilities $2,958 $5,993 $9,359
Other Non-
Controllables $5,916 $11,985 $18,717
Total Oper. Exp. $88,234 $138,242 $193,714
Op. Profit/Loss $59,666 $161,383 $274,211
Interest Exp. $0 $0 $0
Total Company
Profit/Loss $59,666 $161,383 $274,211
Taxes $17,900 $48,415 $82,263
Total Company
NET Profit/Loss $41,766 $112,968 $191,948
Page 118 of 128
- INNOVATIVE ENERGY SOLUTIONS –
Table 48 – Energex Financial Ratios
FINANCIAL RATIO ANALYSIS 2000-2008
Percentage expressed as number value HISTORICAL
2006 2007 2008
Current Ratio 3.78 1.73 2.61
Liquidity
Quick Ratio 3.85 1.89 2.79
Profitability Leverage Assets
Fixed Asset Turnover 14.74 20.13 22.79
Total Asset Turnover 6.99 5.01 3.71
Total Debt Ratio 0.34 0.90 0.16
Equity Ratio 0.66 0.10 0.84
Profit Margin -1% -11% 21%
Return on Total Assets (ROA) -0.06 -0.54 0.77
Return on Equity (ROE) -0.10 -5.19 0.92
Table 49 – Energex Sales & Unit Break-Even Analysis 2006-2008
Fixed Costs
Price Per Unit $300 HISTORICAL
Income 2006 2007 2008
Accounting Fees 11,790 6,447 3,912
Revenue $793,400 $581,482 $658,108 Auto Payments 1,747 -247 9,928
Approximate # Units Sold 2645 1938 2194 Amortization 10,021 12,255
CRA Penalties 100 285
Variable Costs Insurance 16,329 21,763 797
HISTORICAL Interest - Long Term Debt 26,419 12,456 2,589
2006 2007 2008 Internet Charges 237 1,403 3,803
Exchange Gain/Loss -4,920 -8,089 -3,039 Lease Equipment 933 1,042 326
Advertising & Promotion 51,581 44,971 13,902 Legal Expense 261 250 813
Automobile 18,343 13,644 19,574 Licences & Dues 0 151 7,029
Bad Debt 12,691 Management Salaries 42,536 73,456 97,476
Bank Charges & Interest 1,638 10,442 15,858 Management Fees 105,000 90,000
Commission Expense 4,110 6,437 3,323 Office Expense 31,526 27,847 20,324
Consulting Fees 8,332 3,962 Payroll Expense 51,257 32,604 80,711
Education & Courses 365 93 1,265 Rent & Property Tax 20,506 22,454 21,653
Uncategorized Expenses 322 Charitable Donation 2,838 415 240
Materials & Suppliers 156,305 125,133 129,340 Charity 2,275 1,050
Repairs & Maintenance 3,356 12,667 Telephone 15,082 14,024 5,075
Subcontract 174,389 86,465 47,463 Utlilites & Waste Management 366
Travel Expense 21,347 23,710 14,098 Membership Fees 204
Wages - General 313 5,660 0
TOTAL VARIABLE COSTS $444,181 $310,445 $254,450 Wages - Benefits 12,752 17,391 12,251
Contribution Margin $349,220 $271,037 $403,657 WCB 4,927
Break Even Sales $810,969 $731,336 $435,651
Break Even Units 2703 2438 1452 TOTAL FIXED COSTS $356,952 $340,886 $267,211
Page 119 of 128
- INNOVATIVE ENERGY SOLUTIONS –
Table 50 – Vertical Analysis
HISTORICAL
2006 2007 2008
Income
Revanue 793,400 581,482 658,108
Interest Revanue 368 67 9
Total Income 793,769 581,549 658,116
Expense
Exchange Gain/Loss -1% -1% 0%
Accounting Fees 1% 1% 1%
Advertising & Promotion 6% 8% 2%
Automobile 2% 2% 3%
Auto Payments 0% 0% 2%
Amortization 1% 2% 0%
CRA Penalties 0% 0% 0%
Bad Debt 2% 0% 0%
Bank Charges & Interest 0% 2% 2%
Commission Expense 1% 1% 1%
Consulting Fees 1% 1% 0%
Education & Courses 0% 0% 0%
Insurance 2% 4% 0%
Interest - Long Term Debt 3% 2% 0%
Internet Charges 0% 0% 1%
Lease Equipment 0% 0% 0%
Legal Expense 0% 0% 0%
Licences & Dues 0% 0% 1%
Uncategorized Expenses 0% 0% 0%
Management Salaries 5% 13% 15%
Management Fees 13% 15% 0%
Materials & Suppliers 20% 22% 20%
Office Expense 4% 5% 3%
Payroll Expense 6% 6% 12%
Rent & Property Tax 3% 4% 3%
Repairs & Maintenance 0% 1% 2%
Subcontract 22% 15% 7%
Charitable Donation 0% 0% 0%
Charity 0% 0% 0%
Telephone 2% 2% 1%
Utlilites & Waste Management 0% 0% 0%
Travel Expense 3% 4% 2%
Membership Fees 0% 0% 0%
Wages - General 0% 1% 0%
Wages - Benefits 2% 3% 2%
WCB 1% 0% 0%
Total Expense 101% 112% 79%
Profit before tax -1% -12% 21%
Other Income 0% 2% 0%
Taxes
Net income -1% -11% 21% Page 120 of 128
- INNOVATIVE ENERGY SOLUTIONS –
Table 51 – Horizontal Analysis
HISTORICAL
2006 (Base) 2007 2008
Income
Revanue 793,400 73% 83%
Interest Revanue 368 18% 2%
Total Income 793,769 73% 83%
Expense
Exchange Gain/Loss -4,920 164% 62%
Accounting Fees 11,790 55% 62%
Advertising & Promotion 51,581 87% 33%
Automobile 18,343 74% 27%
Auto Payments 1,747 -14% 107%
Amortization 10,021 122% 568%
CRA Penalties
Bad Debt 12,691 0% 0%
Bank Charges & Interest 1,638 637% 0%
Commission Expense 4,110 157% 968%
Consulting Fees 8,332 48% 81%
Education & Courses 365 26% 0%
Insurance 16,329 133% 346%
Interest - Long Term Debt 26,419 47% 5%
Internet Charges 237 593% 10%
Lease Equipment 933 112% 1606%
Legal Expense 261 96% 35%
Licences & Dues 311%
Uncategorized Expenses
Management Salaries 42,536 173% 229%
Management Fees 105,000 86%
Materials & Suppliers 156,305 80% 83%
Office Expense 31,526 88% 83%
Payroll Expense 51,257 64% 64%
Rent & Property Tax 20,506 110% 157%
Repairs & Maintenance 106%
Subcontract 174,389 50%
Charitable Donation 2,838 15% 27%
Charity 2,275 46% 8%
Telephone 15,082 93% 0%
Utlilites & Waste Management 34%
Travel Expense 21,347 111%
Membership Fees 204 0% 66%
Wages - General 313 1811% 0%
Wages - Benefits 12,752 136% 96%
WCB 4,927 0%
Total Expense 801,133 82% 0%
Profit before tax -7,364 980% 65%
Other Income
Taxes
Net income -7,364 854% 1853%
Page 121 of 128
- INNOVATIVE ENERGY SOLUTIONS –
Table 52 – Historical and Pro forma Income Statement
All Amounts in $000 Enegrex Only Energex+Ontario
HISTORICAL PRO FORMA PRO FORMA
2006 2007 2008 2009 2010 2011 2009 2010 2011
Income
Revenue 793,400 581,482 658,108 612,040 569,197 529,354 612,040 569,197 529,354
Interest Revenue 368 67 9 1 0 0 1 0 0
Total Income 793,769 581,549 658,116 612,042 569,197 529,354 612,042 569,197 529,354
Expense
Exchange Gain/Loss -4,920 -8,089 -3,039 5,019 4,667 4,341 5,019 4,667 4,341
Accounting Fees 11,790 6,447 3,912 6,505 6,049 5,626 6,505 6,049 5,626
Advertising & Promotion 51,581 44,971 13,902 33,343 31,009 28,838 33,343 31,009 28,838
Automobile 18,343 13,644 19,574 15,569 14,479 13,466 15,569 14,479 13,466
Auto Payments 1,747 -247 9,928 3,440 3,199 2,975 3,440 3,199 2,975
Amortization 10,021 12,255 6,875 6,394 5,946 6,875 6,394 5,946
CRA Penalties 100 285 124 115 107 124 115 107
Bad Debt 12,691 3,262 3,033 2,821 3,262 3,033 2,821
Bank Charges & Interest 1,638 10,442 15,858 9,000 8,370 7,784 9,000 8,370 7,784
Commission Expense 4,110 6,437 3,323 4,344 4,040 3,757 4,344 4,040 3,757
Consulting Fees 8,332 3,962 3,532 3,284 3,054 3,532 3,284 3,054
Education & Courses 365 93 1,265 519 482 449 519 482 449
Insurance 16,329 21,763 797 12,079 11,233 10,447 12,079 11,233 10,447
Interest - Long Term Debt 26,419 12,456 2,589 11,963 11,125 10,346 11,963 11,125 10,346
Internet Charges 237 1,403 3,803 1,732 1,611 1,498 1,732 1,611 1,498
Lease Equipment 933 1,042 326 706 657 611 706 657 611
Legal Expense 261 250 813 407 378 352 407 378 352
Licences & Dues 0 151 7,029 2,232 2,076 1,930 2,232 2,076 1,930
Uncategorized Expenses 322 113 105 98 113 105 98
Management Salaries 42,536 73,456 97,476 66,919 62,235 57,878 66,919 62,235 57,878
Management Fees 105,000 90,000 58,560 54,461 50,648 58,560 54,461 50,648
Materials & Suppliers 156,305 125,133 129,340 124,166 115,475 107,391 124,166 115,475 107,391
Office Expense 31,526 27,847 20,324 24,172 22,480 20,907 27,691 22,480 20,907
Payroll Expense 51,257 32,604 80,711 49,632 46,158 42,927 49,632 46,158 42,927
Rent & Property Tax 20,506 22,454 21,653 19,860 18,470 17,177 19,860 18,470 17,177
Repairs & Maintenance 3,356 12,667 5,104 4,747 4,414 5,104 4,747 4,414
Subcontract 174,389 86,465 47,463 89,867 83,577 77,726 89,867 83,577 77,726
Charitable Donation 2,838 415 240 949 883 821 949 883 821
Charity 2,275 1,050 953 886 824 953 886 824
Telephone 15,082 14,024 5,075 10,369 9,643 8,968 10,369 9,643 8,968
Utlilites & Waste Management 366 128 119 111 128 119 111
Travel Expense 21,347 23,710 14,098 18,175 16,902 15,719 18,175 16,902 15,719
Membership Fees 204 52 49 45 52 49 45
Wages - General 313 5,660 0 2,066 1,921 1,787 2,066 1,921 1,787
Wages - Benefits 12,752 17,391 12,251 13,176 12,254 11,396 13,176 12,254 11,396
WCB 4,927 1,266 1,178 1,095 1,266 1,178 1,095
Total Expense 801,133 653,749 521,662 596,962 555,174 516,311 609,696 563,744 524,282
Profit before tax -7,364 -72,199 136,455 15,079 14,024 13,042 2,345 5,454 5,072
Other Profit 3,275 3,046 2,833 3,275 3,046 2,833
Profit From Ontario Operations 9,336 57,290 137,781 230,698
Taxes 0 0 0
Net income -7,364 -62,863 136,455 18,355 17,070 15,875 65,255 151,734 243,675
Page 122 of 128
- INNOVATIVE ENERGY SOLUTIONS –
Table 53 – Historical and Pro forma Balance Sheet
HISTORICAL PRO FORMA
2006 2007 2008 2009 2010 2011
Current Assets
Chequing/Savings -99,323 -47,266 -26,564 38,691 190,425 434,100
Receivables 160,159 142,383 185,821 204,403 224,843 247,328
Other Current Assets -1,195 -7,900 -10,712 -10,712 -10,712 -10,712
Total Current Assets 59,641 87,217 148,545 232,382 404,557 670,716
Fixed Assets 53,827 28,883 28,883 28,883 28,883 28,883
Total Assets 113,468 116,100 177,428 261,266 433,440 699,599
Current Liabilities
Accounts Payable 6,789 -13,302 -15,039 -16,994 -19,203 -21,699
Credit Cards 341 31,403 32,416 33,389 34,391 35,422
Other Current Liabilities 8,655 32,197 39,635 48,750 59,963 73,755
Total Current Liabilities 15,784 50,298 57,012 65,146 75,151 87,478
Long Term Liabilities 22,716 53,699 -28,142 -17,693 57,997 68,155
Total Liabilities 38,501 103,997 28,870 47,453 133,148 155,633
Retained Earnings
Total Equity 74,968 12,103 148,558 213,813 300,292 543,967
Total Liabilities & Equity 113,468 116,100 177,428 261,266 433,440 699,600
Page 123 of 128
- INNOVATIVE ENERGY SOLUTIONS –
Table 54 – Required Investment for Energex Ontario
INVESTMENT PER YEAR ($79,212) ($14,935) ($22,085)
QUARTER 0 1 2 3 4 5 6 7 8 9 10 11 1
PROFIT $23,165 $22,599 $28,265 $27,698 $31,038 $30,186 $38,704 $37,852 $52,354 $51,023 $64,326 $62,99
Cumulative Cash Flow $0 ($79,212) ($56,047) ($33,448) ($5,184) $22,515 $38,618 $68,804 $107,508 $145,361 $175,629 $226,653 $290,978 $353,97
PROFIT $11,822 $11,401 $15,606 $15,185 $31,038 $30,186 $38,704 $37,852 $52,354 $51,023 $64,326 $62,99
Cumulative Profit $0 $11,822 $23,223 $38,829 $54,015 $85,053 $115,239 $153,943 $191,796 $244,149 $295,173 $359,498 $422,49
Table 55 – Operating Costs for Energex Ontario, 2009-2012
2010 2011 2012
Warehouse $26,400
Transportation $6,283 $12,729 $19,879
SMART Car $2,206 $2,206 $2,206
Sticker $200
Computer $800
Internet Access $803
Office Furniture $2,519
Salaries $40,000
TOTAL $79,212 $14,935 $22,085
Page 124 of 128
- INNOVATIVE ENERGY SOLUTIONS –
List of Tables in the Appendix A:
Table 1 – Regional Market Data
Table 2 – Regional Market Score
Table 3 – Ontario Industries Data
Table 4 – Ontario Industries Score
Table 5 – Colleges and Universities in Ontario
Table 6 – Health Care Establishments
Table 7 – Health Care Establishments by Size
Table 8 – Growth # of Hospitals in Canada
Table 9 – Ontario Hospitals
Table 10 – Ontario Health Regions
Table 11 – Hotel Establishments
Table 12 – Hotel Establishments by Size
Table 13 – Hotel Investments
Table 14 – Hotel Concentration
Table 15 – Ontario Hotel Locations
Table 16 – Hotel Size
Table 17 – Hotel Service
Table 18 – Hotel Stay
Table 19 – Hotel Themes
Table 20 – Hotel Lifestyles
Table 21 – Number of Hotels in Ontario
Table 22 – Office Buildings in Ontario
Table 23 – Office Buildings in Toronto, ON
Table 24 – Office Buildings in Hamilton, ON
Table 25 – Office Buildings in Kitchener, ON
Table 26 – Office Buildings in Oshawa, ON
Table 27 – Office Buildings in Guelph, ON
Table 28 – Ontario Energy Efficiency Industry PEST Pro/Con
Table 29 – Target Market Share for each Segment, 3 years
Table 30 – Forecasted Sales, 2010-2012
Table 31 – Flyer for Retirement Homes
Table 32 – Flyer for Hotels
Table 33 – Total Marketing Budget Costs
Table 34 – Marketing Plan Timeline, 2010
Table 35 – Porters 5 Force Analysis: Ontario Energy Efficiency Industry
Table 36 – Competitor Intelligence Matrix
Table 37 – Primary Competitor Matrix
Table 38 – Project Timeline/Milestones
Table 39 – Projected Income Statement, Year 1
Table 40 – Projected Income Statement, Year 2
Table 41 – Projected Income Statement, Year 3
Page 125 of 128
- INNOVATIVE ENERGY SOLUTIONS –
Table 42 – Projected Income Statement, Quarterly Summary
Table 43 – Projected Income Statement, Yearly Summary
Table 44 – Projected Income Statement, Quarterly Summary (Optimistic Scenario)
Table 45 – Projected Income Statement, Yearly Summary (Optimistic Scenario)
Table 46 – Projected Income Statement, Quarterly Summary (Pessimistic Scenario)
Table 47 – Projected Income Statement, Yearly Summary (Pessimistic Scenario)
Table 48 – Energex Financial Ratios
Table 49 – Energex Sales & Unit Break-Even Analysis 2006-2008
Table 50 – Vertical Analysis
Table 51 – Horizontal Analysis
Table 52 – Historical and Pro forma Income Statement
Table 53 – Historical and Pro forma Balance Sheet
Table 54 – Required Investment for Energex Ontario
Table 55 – Operating Costs for Energex Ontario, 2009-2012
Page 126 of 128
- INNOVATIVE ENERGY SOLUTIONS –
Appendix B
Energex Consulting Group Shareholder Agreement
This shareholder agreement is effective from March 30, 2009 to March 30, 2011.
Between the members of Energex Consulting Group:
Jennifer Carmin Campos, Kurtis Dool, Frank Li, Danny Molina,
and Yulia Victorova
Agreement:
The following content contains the obligations of this shareholder agreement:
- If the group/member sell(s) the business plan for ENMN 420 to Rami Belson, the
president of Energex Inc., each member of Energex Consulting Group will
receive 20% of total earnings, or equal share.
- If a job position is offered to any member after graduation, it can be freely
accepted. However, any bonus of a value greater than $5,000, within the first
year upon project completion (March 30th, 2009 to March 30th, 2010), will be split
between the team members equally, 20% of the bonus for each member.
- Competition Clause: Until March 30, 2011, no member is permitted to use the
business plan for ENMN 420 project and/or start a business directly competing
with Energex Inc.
- Any member of Energex Consulting Group cannot publish the business plan for
ENMN 420 project.
Closing:
As of March 30th, 2011 the obligations of this shareholder agreement will be voided.
Thus, this shareholder agreement will no longer exist as of mentioned above date.
Shareholder agreement is understood and accepted by:
Jennifer C. Campos: _____________________________________________
Kurtis Dool: _____________________________________________
Frank Li: _____________________________________________
Danny Molina: _____________________________________________
Yulia Victorova: _____________________________________________ May 29, 2009
Page 127 of 128
