Triad SmartHomes: An In-Home Tech Provider  

Business Plan - Final Version              

Drew Weinstock, CEO weinstocka20@mail.wlu.edu   John Wickham, CMO wickhamj20@mail.wlu.edu   Nate Abercrombie, COO abercrombien20@mail.wlu.edu      

1

Table of Contents Executive Summary…………………………………………………………………………………………………………………………………………..3  The Problem…………………………………………………………………………………………………………………………………………….…………5  The Opportunity………………………………………………………………………………………………………………………………………………...6  Description of the Business……………………………………………………………………………………………………………………………….7  Description of the Service………………………………………………………………………………………………………………………………….8  Macro-Environmental Analysis………………………………………………………………………………………………………………………….10  Market Analysis…………………………………………………………………………………………………………………………………………………..13  Customer Analysis…………………………………………………………………………………………………………………………………………….15  Industry and Competitor Analysis………………………………………….……………………………………………………………………….16  Marketing Strategy…………………………………………………………………………………………………………………………………………..18  Operations Strategy…………………………………………………………………………………………………………………………………………..20  Research and Development……………………………………………………………………………………………………………………………..21  Location……………………………………………………………………………………………………………………………………………………………...22  Management and Key Personnel……………………………………………………………………………………………………………………..24  Financial Analysis………………………………………………………………………………………………………………………………………………26  Appendix…………………………………………………………………………………………………………………………………………………………….32     

2

Executive Summary  Mission Statement To strengthen the functionality and connectivity of everyday Americans’ homes by making smart technology installation simple and stress-free. The Problem and Opportunity Smart home technology is becoming increasingly ubiquitous in homes today. However, research shows that frustration with installation and synchronization of smart home technology acts as a major deterrent for potential customers. Similarly, since the smart home tech industry is so young, consumers consistently struggle to make purchasing decisions. In addition, the home building industry has fallen behind the curve in terms of technological innovation. For all these reasons, Triad sees a great opportunity to enter this market and utilize its smart home tech expertise as a subcontractor for home developers. Also, since most players that already exist within the smart home tech installation space focus on selling directly to homeowners, Triad sees a chance to scale its offerings by providing its service during the construction process so that the technology is ready upon move-in. The Business Triad SmartHomes is a smart home technology installation and synchronization company that can be best categorized as a home development subcontractor. Triad will purchase a range of smart home technology products wholesale either directly from manufacturers or through third party vendors and bundle them into two different packages, Gold and Silver. The company will then sell these bundles along with Triad’s installation services directly to home developers. Strategy Triad’s strategy is based around combining high functionality products with unmatched smart home tech installation and synchronization acumen. By focusing specifically on two of Texas’ major markets at the outset, Triad hopes it can leverage strong relationships with partnering home developers to create strong long-term sales growth. Competitors There are three main competitors in the market Triad plans to enter, Vivint, Savant, and Control4. Vivint is the current market leader having retrofitted over 2 million homes with smart home tech installation. Unlike Vivint, which offers a variety of smart home tech product offerings, Savant offers its own luxury home technology system. Savant’s comprehensive and connected system is tailored to each individual home. Control4 is the largest competitor as it operates in over 100 countries and can incorporate over 12,500 third party systems into its own automation and networking platform. Control4 can either retrofit homes or work to install and enable its platform during the construction phase.

3

Competitive Advantages Triad’s competitive advantages are that it offers optimal convenience for the eventual home owner, has first-mover advantage in a newly developing industry, and can offer home developers a cost effective means by which to increase the value of their homes prior to sale. A combination of high functionality products and first-class installation services will make Triad hard for home developers to pass on when seeking to maximize their offerings to potential homeowners. Homeowners will also have the ability to call upon Triad cost free whenever they are experiencing smart home tech difficulties after move-in. Team The Triad SmartHomes management team is composed of three soon-to-be Washington and Lee University graduates, each of which bring a unique collection of skills and experiences. Drew Weinstock, CEO, has experience working in government affairs for Zimmer-Biomet as well as consulting with an NGO abroad in South Africa. John Wickham, CMO, is an experienced entrepreneur with years of start-up experience in the fintech and oral healthcare industries. Nate Abercrombie, COO, brings a multitude of experiences to Triad including brand strategy work for JetBlue as well as work with Maryland Governor Larry Hogan’s political action committee. In addition to their respective roles on the management team, Nate and John will start off in Austin and the Dallas-Fort Worth area as installation specialists until Triad begins hiring and training installation specialists at the end of year one. Once Triad has transitioned installation responsibilities to newly hired specialists at the beginning of year two, Nate and John will resume their COO and CMO responsibilities full time. Economics Triad’s business model is based around its Gold and Silver smart home tech product packages, which are priced at $2,500 and $1,300, respectively, in year one. These price points are projected to grow by 5% year over year through year three. The bulk of Triad’s costs will come from purchasing it’s expensive inventory. Overall, Triad’s business model will be strongly correlated with fluctuations in the home building markets in Austin and the Dallas-Fort Worth areas. Based on current projections, Triad expects to break even in month nine of year two and become cash flow positive in month seven of year three. The company expects to have a net income of $609,899 by the end of year three. Exit Strategy Triad is projecting exponential growth due to the size of the markets it plans to start in, the rapidly growing demand for smart home technology, and the fact that the company is one of the earliest movers in this young industry. Projections of growth throughout the Texas Triangle and strong financial metrics by year three could make Triad an attractive acquisition target within five to eight years.

4

Proposed Offerings Triad will utilize $60,000 from its founders directly as well as an additional $90,000 from family and friends at the company’s outset. All three founders will have the chance to acquire up to 26% equity during the first four years of business operations. The $90,000 invested from friends and family will be designated as a convertible note at a 8% interest rate to be paid back in full principal and interest in 5 years or transferred to a share of equity for every $300 given at a 20% discount rate. At the start of year two, Triad hopes to receive a $300,000 SBA guaranteed loan to help offset initial operating expenses largely resulting from the acquisition of inventory. This funding outline should ensure that Triad’s expenses are properly covered prior to sales picking up in year three.   The Problem(s)  In-home technology has reached a level of ubiquity, to where every room in a household has the potential to be brimming with unique gadgets and interconnected devices. Smart technologies can play a crucial role in some of the main functionalities of a residence, just as they can actively provide entertainment and convenience. Major technology corporations have seen the growing wave of demand for smart products, and are flooding the smart home market with a range of devices like Google Nest assistants, Ring video doorbells, SimpliSafe security systems, Sonos speaker platforms, along with countless others. However, in order for this new level of automation and convenience to be integrated into a home, one must perform the complicated task of installing and pairing the smart technology. This complex undertaking brings in an unnecessary element of frustration and agitation to products that the consumers expect to make their lives easier. More than one third of U.S. adults who have purchased smart home technology say they have experienced issues setting up these devices, and 22% of adults say they have given up and returned products due to these frustrations. These technologies’ failure to meet consumers’ expectations, largely because of their struggles setting up the technologies, is decidedly one of the bigger hurdles for the smart home market as a whole. Despite needing to overcome this obstacle, the market is still 1

growing at such a high rate that, in the near future, it will very likely become the expectation that middle-upper class and upper-class households contain a variety of smart tech. 2

In addition to the frustrations associated with installation, the vast number of options within each area (i.e. smart lighting, smart thermostats, voice assistance, and smart surveillance) can make choosing the best devices to service one’s needs a hindrance to adoption. Similarly, the fact that many of these smart home technologies are best when

1Maxwell, Krystal. “Smart Home Disappointment Will Hinder Adoption.” Energy Research, www.navigantresearch.com/news-and-views/smart-home-disappointment-will-hinder-adoption. 2https://www.businesswire.com/news/home/20180130005463/en/Smart-Home-Creating-Frustrated-Consumers-1-3

5

they are synced adds the hurdle of how to properly configure them if you lack such experience. This is especially the case when people are new homeowners who have larger fish to fry, and would prefer to spend their time addressing more crucial problems. In fact, smart tech reliability and interoperability have been credited as two of the biggest obstacles for consumers. Similarly, 39% of interested customers chose not to 3

purchase smart technology over concerns for how well devices would be able to integrate and work together. The only concern that was more influential in deterring 4

interested consumers was the price of the products. Yet, in the future, as these products continue to establish themselves, it is expected that price will become less of a deterrent. As a result, consumers’ lack of technological literacy regarding installation will become the main deterrent if not properly addressed. In addition to those problems currently burdening the growth of the smart home tech industry, the home construction industry is experiencing a significant issue of its own. It is well known that construction businesses have been lagging in technological investment and innovation. In fact, the industry has been so poor at adopting new 5

technology that it is often cited as one of the most technologically lagging industries in the entire country. The subcontractors within this industry are fractured as a body and 6

largely self-employed, stifling change from occurring at a great scale or speed. This has created a stagnant mindset within the construction world and prevented the integration of new efficiencies. This industry is due for the entrance of tech-minded individuals to 7

provide it the modernization that will allow its continued success deep into the 21st century. The Opportunity  The proliferation of technology into all parts of Americans’ lives can be seen just by looking around, or by reaching for your smartphone in your pants pocket. Additionally, there are no indications that the continually increasing number of individuals adopting new technologies will slow down. Triad believes there is a sincere market opportunity 8

to be seized with respect to the ever-expanding smart-home technology sector, which is predicted to double in size from $76.6 billion to $151.4 billion in the next five years alone. This will provide a considerably well-timed opportunity for Triad, giving it a first mover 9

advantage position in the smart home market by integrating the technology into a 3file:///H:/Downloads/DeRuycketal.-2019-UserNeedsinSmartHomesChangingNeedsAccordingtoLifeCyclesandtheImpactonDesigningSmartHomeSoluti.pdf 4 Patel, Mark, and Kabir Ahuja. “McKinsey Connected Homes.” McKinsey Connected Homes, www.mckinsey.com/spContent/connected_homes/index.html. 5https://www.bisnow.com/chicago/news/construction-development/the-construction-industry-knows-its-behind-the-curve-in-embracing-technology-and-is-working-to-catch-up-85856 6https://www.constructiondive.com/news/kpmg-report-construction-industry-slow-to-adopt-new-technology/426268/ 7 https://www.virgin.com/entrepreneur/construction-falling-behind-innovation-race-heres-how-well-change 8 https://ourworldindata.org/grapher/technology-adoption-by-households-in-the-united-states 9 https://www.marketsandmarkets.com/PressReleases/global-smart-homes-market.asp

6

household before anyone even lives there. Triad will be able to install this technology ideally during the construction of the residence, but additionally through retrofitting already built residences. The exceptionally good timing for joining this industry is made even more appealing by the apparent lack of well-established competitors. Though there are many small-scale companies that are focused on capturing this smart home tech market, two of them have been specifically identified as Triad’s strongest potential competitors. However, neither of them have significant name or brand recognition, nor have they operated with a specific focus on the Texas Triangle, which is where Triad will target its business. Most importantly, however, their business models are all reliant on selling directly to homeowners, which Triad believes affords the chance to seize market share using alternative customer acquisitions methods. Namely, Triad SmartHomes plans to differentiate itself by selling its service to the groups that oversee housing construction and management. Triad believes that by focusing on under-construction homes, it will beat its retrofitting-focused competitors to the market. While the 620,000 houses built in the United States every year is dwarfed by the 178 million existing housing units, Triad believes that pursuing the market for new homes will provide it with a degree of scalability that will help it seize market share more quickly than its competitors. 10

Description of the Business  Triad SmartHomes is a smart home device consultant, installer, and subcontractor focusing primarily on direct selling to developers of residential homes and apartments. Since smart home automation is going to become an expectation in middle-high and high-end homes, Triad can fill this demand by installing and configuring smart home technology in newly built homes . Triad will rely on working with developers on new 11 12

homes and apartments as a subcontractor, since this avenue offers an increased degree of scalability. Triad will need to build a network in the construction industries of Dallas Fort-Worth and Austin, Texas in order to acquire new business. Triad will devote staff and resources specifically to the process of building up its contacts, since this will be crucial to the company’s growth. Triad will attain the smart home devices by buying them in bulk from wholesalers. Online wholesale directories provide innumerable options, both in and out of the Texas Triangle, for Triad to utilize. Should Triad want to pursue options outside of those 13

available online, wholesalers can be reached through trade shows. Because of the

10Nace, Shaun. “Topic: U.S. Housing Market.” Www.statista.com, www.statista.com/topics/1618/residential-housing-in-the-us/. 11 Bady-Holmes, Susan. “Smart Homes Have Become an Expected Standard.” Energy Research, 15 Jan. 2020, www.navigantresearch.com/news-and-views/smart-homes-have-become-an-expected-standard. 12https://www.contractormag.com/smart-buildings-homes/article/20883444/the-smart-home-movement-following-consumer-demand 13 http://www.4wholesaleusa.com/cat13_2.html

7

vague and decentralized nature of wholesale markets, Triad will likely have to utilize several different wholesale options before finding one that can consistently fulfill bulk orders. Research has indicated that Triad can very reasonably expect to buy wholesale tech products at a roughly ~20% discount from retail prices, which will benefit the company’s profit margin. 14 15

Another major part of Triad’s business will be recruiting and training the technicians that will become the installation and syncing experts. The company believes that the most ideal avenues for recruitment would be to reach out to and attend job fairs at community colleges and technical schools. These institutions are attended by people looking to better themselves and their careers, who Triad believes will have the ideal work ethic and ambition to become competent technicians. There are a number of programs that teach people how to become skilled in home automation and smart home technology integration, but the one Triad will use as the standard is the CEDIA professional certification. 16

Triad SmartHomes benefits from not having an overwhelming overhead at the start of the business. The company will not initially require an office space, rather just two large storage units in Austin and Dallas-Fort Worth to store tech devices in while they await installment. An office space can be acquired once operations need to be scaled up, but is not crucial during the opening stages of the company. Triad’s website will have to be extensive, but will not require any unusual features that could raise the cost of developing it. The business plans to acquire one vehicle per technician in the years following year one, once an adequate amount of cash has been accumulated, as the founders are okay with using their personal vehicles for the initial year or so. For a visualization of the businesses value proposition, see Exhibit 1 in the models section. Description of the Service  Triad SmartHomes will provide a value-adding service for both homeowners and real estate developers. Company employees will begin by reaching out to developers in the Austing and Dallas-Fort Worth area to inquire as to whether or not they’d like to utilize our service. Once contact is made and a developer has signed onto the idea of working with Triad, the company will begin to formulate a plan that suits the client’s desires. They will have the option of choosing between Triad’s Gold and Silver pre-set packages. Triad will have the devices to perform installation of the Gold and Silver packages on hand, and will be able to order alternative devices should the developer decide they would prefer so. The Gold Package entails a Honeywell Home T9 Smart Thermostat, a Simply Safe “Essentials Package” security system, a Sonos “In the Walls” speaker system, and four Amazon Echo dots, all of which when combined would retail at approximately $1875. The Silver Package would include a Honeywell

14 https://ceklog.kindel.com/2012/08/30/retail-pricing-markup-and-margins/ 15 http://www.tom-gray.com/2012/04/26/reasonable-markup-to-distributors/ 16 https://www.cedia.org/cedia-certifications

8

RTH8580WF Wi-Fi Thermostat, a Simply Safe “Foundation Package” security system, a Sonos “Two Room Set” speaker system, and two Amazon Echo Dots, all of which when combined would retail at approximately $755. Neither of these stated retail prices include the anticipated 20% wholesale discount. These two offered packages are incredibly non-rigid, and are offered merely as examples for developers to use to gauge potential set-ups and approximate prices. Triad anticipates that a significant minority of the developers who contract us would prefer to negotiate a more specialized package for themselves. In this event, Triad would be able to purchase and install either more luxurious, or more cost-efficient devices, depending on the preference of the developer. Triad could also change the quantity of devices that are offered in the packages to suit customer needs. Should the customer opt to include devices which Triad does not routinely hold in inventory, there will be a small service fee added for the cost of acquiring a wholesale purchasing avenue, in addition to a longer lag between when the contract is finalized and when Triad can begin installation work. After the developers or contractors have negotiated their ideal product lineup, Triad will meet again with them to discuss the specifics of installing the smart home tech. Triad will need to communicate to electricians, either directly or through contractors, the necessary electrical wiring for the devices to be set up. Many of the devices, especially in-wall speakers, thermostats, and security cameras, require specific wiring configurations to work adequately and aesthetically blend in. The company believes that it will save a considerable amount of time and money by passing off the task of the wiring onto the electricians, rather than sending an employee to the construction site to perform the task themselves. After the necessary wiring is installed, during the phase of construction when drywall installation is being performed, is when a Triad technician will visit the construction site. At this point they will install the devices in their proper locations, and then synchronize the devices through their respective software apps. It is expected that this task will consume approximately half of a standard work day. The final stage of Triad’s involvement in the smart home installation and device synchronization process for the developer-side of the business would occur further down the line, when occupants move into the residence. Triad will have the developers give out the company’s contact information to homeowners so that the residents can call a customer support line for assistance or troubleshooting. This line will be staffed by the most technologically-inclined of the founders during normal business hours until the company is able to afford a full-time assistant. Triad will also help by providing digital resources on the company website, such as manuals and quick-fix guides. Triad will also offer to perform charge-free, in-home visits should the problem appear to be unfixable remotely. Additionally, Triad will offer training and instruction free of charge to homeowners who are having trouble learning to use the technology. Triad’s service will provide value to developers by giving them an avenue for differentiating the houses and apartments they are selling. The rising popularity of smart home technology will be an interesting sticking point during their sales pitches to potential homeowners. Triad will also be saving developers the time and money

9

associated with coordinating the purchasing of smart home devices. The wholesale, and ideally manufacturer contacts that Triad will have in the tech industry will reduce the complications and prices associated with acquiring these devices. The company will also save developers from having to hire and train technicians who can perform the task of product installation and syncing. Triad SmartHomes will also be adding value for the homeowners who purchase these new residences. They will have the benefits of specialized climate control, comprehensive security systems, surround sound speakers, and in-home voice controlled assistants. Additionally, homeowners will have acquired all of this technology immediately upon moving-in at no labor expense or headache to themselves. Finally, residents of the homes will also have access to Triad’s online, over the phone, and home visit troubleshooting resources. To visualize how this process creates value for Traid’s stakeholders, see Exhibit 7. Macro-Environmental Analysis Political/Legal Factors  Political factors will not be highly relevant to the business model of smart home installation. The most concerning potential political obstacle would be if new regulatory policies were placed on data collection by smart devices. Smart home devices leave a major digital footprint and produce a massive volume of data for tech manufacturers. The tremendous value of this data to manufacturers drives down the retail prices of these devices. Should it become harder for the tech companies to collect this data, it is possible that they will raise the prices of their products. There is no current federal legislation in the United States that deals with user data and protection, but there are a few state governments passing legislation involving data privacy. For instance, The California Consumer Privacy Act of 2018 became effective as of January 1st, 2020, and allows consumers to request businesses to disclose any data they have collected on them. Though it may drive device prices up, the enactment of similar legislation 17

protecting user data in their homes may also give legitimacy to smart home devices and increase consumers' trust of the products. On the contrary, if the data is left unprotected, it could pose a serious problem in regards to the safety and ethicality of these devices. Economic Factors  There are several key elements of the economy that will have an impact on the development of this business. A low unemployment rate strips businesses of their bargaining power in wage-setting, and will make it easier for potential employees to

17 “Bill Text.” Bill Text - AB-375 Privacy: Personal Information: Businesses., leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201720180AB375.

10

pass up offers from the company. Another economic factor that will correlate with the growth of Triad SmartHomes will be the health of the United States, and especially Texas’ housing market. A key driver of success for housing markets is low interest rates, which reduce the cost of acquiring a mortgage on a home. Currently, the 30 18

year mortgage interest rate is extraordinarily low, 3.74%, which greatly increases the demand for homes and therefore the construction of new homes. Another key 19

economic factor that will play into the viability of subcontracting in the housing market is the demographics of a region. The Texas Triangle is expected to see significant population growth, perhaps even upwards of 20% through 2030, which will stimulate the housing markets in both cities. A final, crucial, and obvious factor for the success of 20

Triad will be the overall health of the economy. Should things take a turn for the worst, subcontractors have to be prepared to handle a drastic reduction in the rate of the construction of new homes. This will put Triad into dire economic straits, and force it to capture a significant portion of under-construction residencies in the Texas Triangle should the company want to remain above water. Additionally, Triad will be plagued by a reduced public appetite for luxury goods, which smart home devices are considered to be. The current state of the economy is in flux due to the recent outbreak of the COVID-19 virus. With the US and world economy at a virtual standstill, there is great uncertainty about the future of the economy. Some experts predict an impending long term recession with a real GDP growth of -2.9% in 2020. Donald Trump and the US 21

Congress have initiated economic stimulus packages that will supposedly help the economy rebound quickly after the virus is stifled. If there is to be a recession, which is more likely of the two situations, unforeseen hurdles could be placed in the way of Triad’s plans to launch. Nonetheless, Triad hopes that Americans’ increased time in their homes will help grow interest in increasing home functionality through smart home technology. Social Factors  Triad’s growth is predicated on the continued increase in adoption of smart home technology, which is estimated to have achieved a compound annual growth rate of 42% between 2017 and 2022. A social factor that is impeding this adoption rate, 22

however, is believed to be concerns over data privacy with 28% of Americans saying they would forgo a certain technology over concerns for their privacy. Tech companies 23

have proven to be apathetic to these concerns because the data is so valuable to them. In the summer of 2019, the FTC fined Facebook $5 billion for illegally mining personal

18 https://www.investopedia.com/articles/mortages-real-estate/11/factors-affecting-real-estate-market.asp 19 https://www.bankrate.com/mortgages/current-interest-rates/ 20https://austin.curbed.com/2016/4/27/11521900/austin-growth-population-texas-triangle 21https://www.morningstar.com/articles/976107/coronavirus-update-long-term-economic-impact-forecast-to-be-less-than-2008-recession 22 https://www.bcg.com/publications/2018/mapping-smart-home-market.aspx 23 https://techcrunch.com/2018/06/03/will-smart-home-tech-make-us-care-more-about-privacy/

11

data and improperly using that data. To make matters worse, experts in the data 24

collection sector believe that tech companies will continue to ramp up their efforts in data collection. The consumer worries over data collection are potentially heightened 25

with smart home devices due to this tech being located in a person’s most intimate setting. If the United States government is able to legislate a data privacy law and ease the public conscience about having smart devices, there could be an increase in demand for these products and a heightened value for Triad’s business. Technological Factors  As of right now, there are several major technology companies that make up the market leaders in the smart home industry. Namely, these are Amazon, Philips, Google, Ecobee, Belkin, and Samsung. However, there is a strong element of competition in 26

the industry as smaller players are entering and trying to undercut the larger established corporations by offering increased functionality or lower prices. Triad does not believe they will pose a notable force in the future, as consumers rated brand recognition the most important factor when purchasing a smart home device. It is predicted that the 27

smart home industry will make advancements in terms of artificial intelligence, especially within the security and climate based segments of the market. Additionally, 28

Triad is aware that there is research being done toward integrating kitchen appliances, namely refrigerators ovens, and microwaves, into smart home connectivity. However, 29

the most significant technological hurdle facing the industry is the lack of connectivity and integration of devices across a singular platform. The lack of standardization is inhibiting the industry’s growth, as 77% of consumers rated smart home product’s ability to connect with all other smart products in the home as “very important”. While there 30

are exciting technological innovations that await the smart home industry, it will have to face some logistical realities before those become the most important points of focus.   

24 “Facebook to Pay Record $5bn to Settle Privacy Concerns.” BBC News, BBC, 24 July 2019, www.bbc.com/news/business-49099364. 25https://www.cnbc.com/2019/12/19/how-tech-giants-persuaded-us-to-buy-products-that-track-us-at-home.html 26Larke, Laurie. “The Biggest Smart Home Companies and What They Offer.” Computerworld, Computerworld, 5 Oct. 2018, www.computerworld.com/article/3412217/the-biggest-smart-home- companies-and-what-they-offer.html#slide6. 27 “Nearly 75% of Consumers Planning to Buy Smart Home Devices Value Interoperability with Other Products in Their Home.” Parks Associates, www.parksassociates.com/blog/article/pr-06052018. 28https://www.forbes.com/sites/forbestechcouncil/2018/01/12/14-predictions-for-the-future-of-smart-home-technology/#640e600e2e21 29https://www.forbes.com/sites/forbestechcouncil/2018/01/12/14-predictions-for-the-future-of-smart-home-technology/#640e600e2e21 30 “Nearly 75% of Consumers Planning to Buy Smart Home Devices Value Interoperability with Other Products in Their Home.” Parks Associates, www.parksassociates.com/blog/article/pr-06052018.

12

Environmental Factors  Increasingly often, smart home technology is being seen as a viable option for those looking to play a more direct role in helping the environment by being more energy conscious. For example, the ability to sync and centrally control one’s HVAC, water heating, and appliances allows for greater ease in managing usage as well as costs. While projections differ depending on a number of factors, most home automation technology claims to save up to 15% of energy, with some brands like Nest claiming upwards of 20%. With respect to cost, it is estimated that 45% of American smart home technology users save $1,179.60 over the course of one year. Given the increased 31

attention to climate change and the grassroots nature of the movement, the growth of the overall smart home industry will likely correlate with these continuing environmental concerns and, as result, could add to these technologies’ appeal. As demand for these products grows, as will the industry’s need for skilled installation and configuration. For more information on the factors that will be affecting Triad’s business environment, see Exhibit 7 in the models section. Market Analysis  The target market of Triad SmartHomes is all home and apartment complex developers, with a focus on those who are looking to technologically differentiate themselves. As technology continues to progress, smart homes are becoming more prevalent and normalized. This leads the firm to strongly believe that the smart home market will only continue to grow and become increasingly accessible. There is a current household penetration rate of 32.4% and is expected to reach 52.4% by 2024. The focused 32

demographic would be users from the ages of 25 to 50 years old which accounts for 57% of all smart home users. Geographically speaking, the firm will focus on urban 33

and suburban areas while steadily expanding out to surrounding rural areas. As of 2019, 31% of adults in rural areas own four or more modern technology devices(computer, smartphone, home broadband, tablet computer) while 43% of suburban adults own all four devices. 76% of adults in rural communities say they use 34

the internet daily while 86% of suburban adults engage daily. Altogether, this gives the 35

31 Tuohy, Jennifer. “Checking the Cost: Do Smart Homes Really Save Energy?” The Ambient, 3 Feb. 2020, www.the-ambient.com/features/do-smart-homes-save-energy-1232. 32 Shaulova, Esther, and Lodovica Biagi. “Smart Home in the U.S.” Statista, www.statista.com/study/66079/smart-home-in-the-us/. 33 Smart Home - United States: Statista Market Forecast.” Statista, www.statista.com/outlook/279/109/smart-home/united-states#market-age. 34Perrin, Andrew. “Digital Gap between Rural and Nonrural America Persists.” Pew Research Center, Pew Research Center, 31 May 2019, www.pewresearch.org/fact-tank/2019/05/31/digital-gap-between-rural-and-nonrural-america-persists/. 35Perrin, Andrew. “Digital Gap between Rural and Nonrural America Persists.” Pew Research Center, Pew Research Center, 31 May 2019, www.pewresearch.org/fact-tank/2019/05/31/digital-gap-between-rural-and-nonrural-america-persists/.

13

indication that urban areas will be quicker to adopt and buy smart home technology than rural areas, making it the primary regional focus. In 2019, connected home products, which are smart home items bundled together, reached 5.4 billion U.S dollars in sales. Similarly, the number of smart home systems 36

installed in North America as of 2019 was 40.7 million units. Most all smart home 37

devices require the customer to figure out installation and synchronization for themselves. As a result, there is likely a growing opportunity for a business to take this hassle out of consumers’ hands. Security systems, home entertainment systems and energy management systems among other systems are all expected to penetrate the market and will require expert help. One means of addressing this market is by servicing homes directly during the building process before the consumers even step foot into the home. Two potential markets to consider are the Austin and Dallas-Fort Worth areas. Combined these two markets offer a total addressable market (TAM) of roughly 51,197 new home starts on an annual basis as of the end of 2019. In determining the serviceable addressable market 38

(SAM), Triad focused on the smart home technology household penetration rate of 34.2% as well as the median list prices for homes in Dallas and Austin, which were found to be $390,000 and $407,400, respectively. Since Triad intends to focus on 39

homes that are worth roughly $400,000 or more, the company calculates its SAM to be 8,755 homes per annum. Within this, the firm sees roughly 3,000 to 4,000 houses per year as a reasonably obtainable serviceable market (SOM) given that this is a brand new market and Triad will be the best equipped company in Austin and the Dallas-Fort Worth areas to serve home developers. Market Segmentation  As smart home technology becomes more ubiquitous, start-ups are increasingly exploring how services can play a role in this market. To this point the major differentiators in the smart home services space are the timing of installation and the price point of homes being serviced. Currently, it is significantly more common for homes to be retrofitted with smart home technology than to have it built into the home during construction. And, those that do offer installation during construction only do so for extremely high end homes, beyond the reach of the majority of smart home technology consumers. For this reason, as smart home technology becomes

36 Shaulova, Esther, and Lodovica Biagi. “Smart Home in the U.S.” Statista, www.statista.com/study/66079/smart-home-in-the-us/. 37Liu, Shanhong. “Installed Smart Home Systems North America 2016-2023.” Statista, 7 Nov. 2019, www.statista.com/statistics/948666/north-america-smart-home-systems-installed-forecast/. 38 https://www.dallasnews.com/business/real-estate/2019/05/06/d-fw-tops-the-u-s-in-new-home-starts/ 39https://www.noradarealestate.com/blog/dallas-real-estate-market/#Dallas_Real_Estate_Inventory_And_Sales_Data https://communityimpact.com/austin/central-austin/housing-real-estate/2019/06/21/city-of-austin-median-home-price-hits-new-record-reflects-tightening-housing-market/

14

increasingly affordable and a heightened expectation of home buyers, Triad believes there is an opportunity to provide installation services for everyday consumers prior to move-in. See Exhibit 5 to gain more insight on the Market forces that are acting on Triad  Customer Analysis  Demographic and Psychographic   As discussed in the market analysis, Triad’s target customers are home developers in the Dallas-Fort Worth and Austin areas. These developers are ones building homes likely to be sold for at least $400,000 or more. In the Dallas-Fort Worth area, these developers will be ones building within the city itself as well as suburban neighborhoods like Bluffview, Frisco, Highland Park, and Coppell. In Austin, targeted developers will be ones focusing on suburban neighborhoods such as Mueller, Shady Hollow, Windsor Park, and Avery Ranch. Triad expects the eventual home and apartment renter to 40

range from 28 to 50 years old.

While Triad is clearly concerned with the people that will eventually be using the technology it seeks to install, home developers are the utmost priority. These customers of Triad are more easily identifiable than if it were to attempt to install on a house by house basis after the completion of the building process. Although home builders in both Dallas-Fort Worth and Austin tend to offer a range in terms of their home building styles, research shows that several builders seek to differentiate themselves in terms of their homes’ operating efficiency and energy awareness. Triad sees these builders, which generally tend to build more modern-looking homes, as some of its more easily identifiable customers. That being said, more traditional luxury and custom home builders still offer Triad a highly exploitable market opportunity given the high level of utility and convenience added to every home. As the home building industry has rebounded from the Great Recession, many within the industry have focused heavily upon how to differentiate themselves. Industry analysts have suggested that home builders have tendencies to create exceedingly similar homes and apartments, though they do not wish to. For this reason, Triad 41

believes it fills this need for differentiation by offering a new contracting service to builders that will greatly enhance the functionality of their homes and/or apartments at a time when homeowners are seeking added technological enhancement within their homes.  

40 https://austinfamily.com/best-neighborhoods-in-austin-for-young-families/ 41https://www.builderonline.com/builder-100/marketing-sales/12-ways-to-stand-out-from-your-competition_o

15

Economic Status  Within the suburban areas listed above, the average home prices range from $344,570 to $572,000. Highland Park in Dallas is a significant outlier from the other neighborhoods in that the median home price is $1,413,900. Triad will target developers operating in middle to high-end real estate markets because its service will raise the price of a house, which is less likely to deter home-buyers if they are relatively more wealthy. Purchasing Decision  The purchasing decision for one of Triad’s product installation packages for homes will likely go one of two ways. Builders working on more standardized developments would decide whether or not to contract Triad for a predetermined number of houses. In the case of a custom home builder, the decision would rest largely with the eventual home owner. In this less likely case, Triad will emphasize how its product installation packages are a baseline that can be subject to additional specialization. The core security, sound system, voice assistance, and temperature control offerings would likely remain constant but quantity and brand would be the most negotiable aspects in working with an eventual homeowner and builder. From there, price points could become more flexible. Industry and Competitor Analysis  The smart home technology subcontracting industry is a niche, but growing market, that is currently in its infancy. There are few established players who occupy the space, and those that do are either highly regionalized or focused on different segments of the market than Triad SmartHomes. Exhibit 2 highlights the unique position that Triad plans to put itself into relative to its competitors, where the company will focus on contracting with housing developers and offering a range of prices to suit their needs. Many of the other companies currently doing smart home installation focus largely on retrofitting existing homes. Others that contract to housing developers like Triad plans to, offer almost exclusively luxury devices, and therefore charge high prices. The fractured and chaotic overall nature of the market provides an ambitious company like Triad with a great opportunity to establish itself. Porter’s Five Forces  The five industry forces do not have a large impact on Triad. The firm is entering a white space in the smart home technology industry, which means that it is a first mover in the space. The existing rivalry amongst competitors within the industry does not affect Triad’s business. As seen in the competitor analysis section, all current competitors focus on retroactive smart home installation while Triad focuses on preemptive

16

installation and therefore there is no competition in the space currently. The threat of new entrants however is decently high but not a great concern for the firm. There are medium barriers to entry in the subcontracting smart home installation market with the two primary barriers being smart home installation ability and having a network of developers. Currently the largest threat would be competitors and or large smart home product producers could pivot into the firm’s space but there is no evidence that suggests that this will occur. Secondly, it will be hard for new entrants to compete with Triad once the firm develops an extensive network with housing developers and has become the primary smart home installation subcontractor. There is no threat of substitutes for the smart home market as it is a unique product. The only alternative would be to not have smart home technology. The bargaining power for suppliers is high. The firm has to buy the technology at cost and does not have any initial bargaining power. After scaling to a certain size after 5 years and servicing enough homes, the firm could potentially have more bargaining power when buying smart home technology. However, this is not a given and the suppliers set the cost of the product. The customer bargaining power is medium in this industry. The primary customer of the firm is the housing developers and contractors who pay the firm for the sub-contracting services. While the buyer will have to pay for the base cost of the smart home products installed, the firm does not have much power when deciding service fees.

Triad’s primary competition is Vivint, a holistic smart home installation company based in Utah. Founded in 1999, Vivint began as an alarm system and security but pivoted into home monitoring and smart home technology in the mid 2000’s. Vivint is the current market leader, having serviced over 2 million homes in smart home installation. Vivint 42

offers a wide variety of products ranging from Google home devices and Nest Thermostats to fully comprehensive smart home security systems. Vivint offers 24/7 43

hour monitoring and has their own smart app to control the entire system. The firm retrofits existing houses with a range of smart home solutions and does not operate during the house construction period. The cost of Vivint ranges depending on the package of choice. All packages are subject to a 4-5 year contract with the cheapest option costing $599 and the most expensive +$1,789. These packages do not include 44

the monthly security service and smart home monitoring services which go for $29.99 and $39.99 a piece. Users can forgo these options and pick a variety of items 45

a-la-carte and then pay the installation fee.

42 https://www.vivint.com/resources/article/10-things-know-about-vivint-smart-home 43 https://www.vivint.com/products/app 44 https://www.safehome.org/security-systems/vivint/ 45 https://www.safehome.org/security-systems/vivint/

17

Savant is a competitor that has segmented itself as the luxury brand of smart home installation. Unlike Vivint, Savant produces and installs their own home technology system. This is a comprehensive and fully connected system that is tailored to each individual home. The entire system is controlled through the Savant Smart app that 46

provides the user with a seamless experience. This is considered a luxury product, even for the smart home device market. Complete packages start at 1,599 MSRP and it is estimated that deployed over multiple rooms that cost comes out to $1,000 per room. 47

This is a very expensive smart home solution and can only be afforded by the higher income demographic.

Control4 is a publicly traded company based out of Salt Lake City, Utah that focuses on automation and networking systems for homes and business. This is the largest competitor as Control4 operates in over 100 countries and can incorporate over 12,500 third party systems into their platform. Control4 is very versatile in their abilities as they 48

can either retro-fit homes and businesses with smart home technology or complete installation during the construction phase. Similar to the two other main competitors, Control4 has an app which integrates all the devices onto one easy to use platform. 49

Depending on the system of choice, the price of the technology and installation can range from $1,000 to over $250,000. 50

Marketing Strategy  Service Strategy  Triad SmartHomes will provide home and apartment complex developers with a means to bring smart home technology into their under-construction residencies by contracting the tech installation to one of the company’s technicians. Homebuilders will have the option to choose between one of our two service packages, the Gold and the Silver, priced at $2,500 and $1,300 respectively for each home. The price variance in these packages is attributable to the differing products that are offered in each, the quantity of products, and the additional labor time they require to install. These packages are primarily a means of providing these developers with a baseline estimate of what they can expect to spend in each home, as Triad expects to negotiate personalized contracts with the majority of those it does business with. Triad also expects that developers will find working with the company to be an efficient process that is unobtrusive to their building schedules and helpful in giving the residences they construct an edge on the rest of the market.

46 https://www.savant.com/what-is-savant 47 https://www.savant.com/node/661 48 https://www.linkedin.com/company/control4 49 https://www.control4.com/solutions/catalog 50 https://www.cloud9smart.com/control4_pricing

18

Distribution Strategy  Triad SmartHomes will be driving to the construction sites to perform installation and configuration of smart home technology. Technicians will be asked to use personal vehicles for transportation and receive travel cost reimbursements. The technicians based out of Austin and Dallas-Fort Worth respectively will not have to migrate between cities, and will instead be based firmly in one or the other. Pricing Strategy  Triad is currently building its model around a cost-plus pricing strategy, where the firm is simply adding the expenses associated with performing the service to a small amount for the founders to take home as income. As the company grows and accumulates a more sizable cash reserve, Triad plans to switch to a more competitive pricing structure that will allow it to better compete with the competition. However, even under the arrangement of Triad’s current pricing strategy, the company is quite competitive due to avoiding over-charging for products that are being bought at wholesale prices. Below is the full breakdown of how Triad has reached its starting price points.

Advertising and Promotion Strategy  Triad will not be using conventional advertising and promotional methods as a means to expand the firm’s client base. Rather, Triad will rely on networking and contacts that are made through trade shows in order to facilitate business growth. It is not important to the firm that it attains name recognition among consumers, but rather that it does so among developers and the higher-ups of the Dallas-Fort Worth and Austin real estate industries.

19

In order to continuously promote the business, members of Triad’s management team will attend and present at three trade shows per year. These three will be the Dallas Build Expo, the Business Tech Expo in Austin, and the Austin Home & Garden Show. Projections show attendance and presentation at each of these shows costing roughly $2500 each. During the three months prior to starting business operations, Triad plans to attend the 2020 Dallas Build Expo as well as invest in booth and presentation materials. As discussed in the Research and Development section, Triad will further foster relationships in the industry through membership in trade associations. Sales Strategy   Triad will operate primarily in the business to business segment. Acting as a subcontractor, the primary customer and focus of Triad’s sales operations will be housing and apartment developers and contractors. The primary sales strategy initially will be face to face sales with housing contracts and creating a network of referrals within the Dallas-Fort-Worth and Austin areas. This strategy is founded in the personal relations and connections of Drew Weinstock, Nate Abercrombie and John Wickham, all of which are soon-to-be Washington and Lee University graduates. There are currently 9 alumni in the Dallas Fort-Worth Area that work in residential real estate development that can be of additional help in further establishing Triad’s business.   The first tranche of sales will be the value proposition brought to the home developer. Triad not only takes care of the entire smart home installation process in a quick and efficient way, but also makes the developments significantly more attractive to buyers. Coldwell Banker Real Estate just released a study where it was found that 71% of buyers want a move-in ready house. 54% of those participants said that if they had to choose between identical houses, one with smart home tech and one without, they would choose the house with the smart technology . In another survey conducted by 51

John Burns Real Estate Consulting, prospective buyers rank smart technology as one of the most important factors when evaluating housing options. By hiring Triad, developers will make their properties move attractive and subsequently increase their sales. Operations Strategy  Triad SmartHomes will start off by wholesale purchasing three months worth of product inventory, which will cost $18,064. Going forward, Triad will replenish its inventory each month in accordance with its three month sales projections. This is subject to slight adjustments depending on new product launches from the company’s suppliers. Triad will rent one storage unit in both Austin and the Dallas-Fort Worth area, which will be used for housing inventory. These will cost a combined $514 per month.

51http://digitaledition.chicagotribune.com/tribune/article_popover.aspx?guid=151bed7e-0b51-4b3a-80f1-522391263151

20

Triad SmartHomes’ management team will be in charge of designing and updating the company website by primarily using WordPress and Adobe Photoshop. Combined these two applications will cost $36 per month. An additional $10 will be paid prior to starting business operations for buying the triadsmarthomes.com web domain. Triad will also designate $10,000 at the outset for developing content of a model installation to display on the website. The management team expects that labor will cost $200 per installation job since Triad will pay its installation specialists $20 per hour with the expectation that each installation will take roughly 10 hours (1.25 workdays). The management team plans to hire its first installation specialists at the start of year two. Until that point, Nate Abercrombie will focus on jobs in Austin, while John Wickham will focus on jobs in the Dallas-Fort Worth area. The wage costs allocated to Installation Specialists in the model will be paid to Nate and John through the end of year one. Meanwhile, Drew Weinstock will ensure business operations and logistics begin running smoothly between Triad’s two locations. Triad will pay for smart home technology installation certification programs for Nate and John through CEDIA. As a result, Nate and John will be Certified Electronic Systems 52

Networking Specialists. Training, studying, and taking the final CEDIA exam will cost roughly $950 for the two of them. Installation Specialists will be trained during the last month of year one with the expectation that they will begin working the first month of year two. Once this happens, Nate and John will resume their COO and CMO positions full-time and phase out of their installation responsibilities. Based on current sales projections, Triad will hire four full-time installation specialists heading into year two, all of which will be compensated entirely through hourly wages. Similar projections show Triad needing to hire and train an additional eleven Installation Specialists for year three. Research and Development  The website will be developed during the first of three months leading up to the initial month of operations. As of right now, Triad plans to start operations in July, meaning that the website would ideally be done by the end of April. At this pace, Triad will be up and running by the end of the busy summer months and in full swing for the fall building season. In addition, given that Triad’s business model is closely tied to quickly developing technology, it will be important to remain aware of updated product offerings. That being said, as long as the functionality of a given product does not advance significantly with the introduction of a new generation, Triad does not believe it will need to rush to purchase and replace inventory. The product most susceptible to further development will likely be the Amazon Echo.

52 https://www.cedia.org/cedia-certifications

21

Overall, the most critical source of business development will be establishing amicable and trusting relationships with the major stakeholders in Dallas-Fort Worth and Austin’s home building industries. In addition to attending and presenting at trade shows in the area, Triad will apply for admission into some of the larger trade associations in these respective areas to help further foster relationships with the residential building communities. In the Dallas-Fort Worth area, Triad will join the Subcontractors Association of the Metroplex and the Dallas Builders Association. Admission to the Dallas Builders Association would also come with admission into the National Association of Home Builders and Texas Association of Builders. In Austin, the business will apply for admission into the Home Builders Association of Greater Austin. Altogether, membership in these associations will cost $1,993 per year for the whole company. Location  When it comes to the housing market, nothing matters more than location. For this reason, as a relatively niche subcontractor, Triad must initially offer its services in a unique market in order to ensure that the desired growth trajectory can be met. The three top criteria management based its search off were the following: starting in a top ten housing market, that the market would be suitable to home building year-round, and that there is an additional cultural affinity in the given market for home functionality and aesthetics. For these reasons, Triad settled on starting off in the Dallas-Fort Worth area and Austin, Texas. Dallas-Fort Worth is the country’s largest home building market, thereby, making it an obvious choice for where to start a home development subcontractor business. As mentioned in the Customer Analysis section, specific neighborhoods of focus will include Bluffview, Frisco, Highland Park, and Coppell. As of May of 2018, Dallas-Fort Worth reached just over 34,500 home starts on an annualized basis. At the time of this 53

report, this meant a 2.75% increase year over year from the first quarter of 2018. This is the highest level of new home building in the area since the start of the Great Recession. All that being said, Dallas-Fort Worth is not expected to see much more growth in the coming years as the current annualized home start rate is projected to stay constant.

53 https://www.dallasnews.com/business/real-estate/2019/05/06/d-fw-tops-the-u-s-in-new-home-starts/

22

Austin, Texas is the fastest growing metro area in the country as well as quickly becoming one of the country’s fastest growing home building markets. Specific neighborhoods of focus will include Mueller and Windsor Park, which are in the northeast part of the city. As of the first quarter of 2019, it ranked as the eighth largest home building market in the country. Austin finished 2019 with 18,905 home starts, 54

including a 43% increase in the 4th quarter of 2019 from the same period a year prior. 55

Metrostudy, which offers housing market analysis, projects that “2020 could be another record year, thanks to continued strong demand and record lot deliveries.” In addition, Austin’s rise to being one of the nation’s top tech hubs lends itself nicely to Triad’s services. Given the prevalence of other tech companies, such as Apple, Amazon, and Facebook, Triad sees Austin homeowners as having a heightened appetite for smart home technology services. After establishing its footing in the Dallas-Fort Worth and Austin areas, Triad SmartHomes plans to grow its business through expansion into Houston in year four and San Antonio in year five. Houston is the country’s second largest home building market (30,206 annualized home starts as of May 2019), while San Antonio is the country’s twelfth largest home building market (12,277 annual home starts as of May 2019). Beyond year five, Triad plans to grow into the Central Florida housing market.      

54 Ibid. 55https://www.statesman.com/business/20200214/building-momentum-austin-area-new-home-construction-sets-records-in-2019

23

Management and Key Personnel  Founding Team:  Drew Weinstock, CEO 

Drew is a seasoned business professional who brings years of experience to the table. A current senior at Washington and Lee, this CEO has the necessary leadership skills and business acumen to ensure the growth and profitability of Triad. Drew’s leadership foundation and problem solving ability is derived from his experience in politics. Serving time at Zimmer-Biomet, a governmental affairs and the Ronnie Campbell Reelection campaign, Drew understands how to solve

problems in a tricky environment. He also spent the last four years as the regional midwest chair for the nationally recognized and revered Washington and Lee Mock Convention. In addition to his political experience, Drew has also spent a summer as consulting intern at the NGO Prochorus Community Development where he led various initiatives to aid South African community-based organizations. Here, Drew developed a comprehensive marketing and fundraising program. He will invest $20,000 in return for 10% equity with the chance of receiving an additional 16%, which will be vested in 4 years at a rate of 4% annually. John Wickham, CMO 

John is a qualified entrepreneur and has years of start-up experience under his belt. A senior at Washington and Lee double majoring in Business and Chinese, John has a deep understanding of what it takes for a company to be successful. John began working with early stage ventures during his high school years, consulting for the San Francisco-based sports social media platform SickSports and the Arlington headquartered military communication and lifestyle startup

Sandboxx. During his college years, John spent a year on the executive team of the consumer fintech platform Tikkit. John was critical in growing the Tikkit college rep program from 4 initial reps to 68 reps nation-wide and conducting sales with over half a million dollars being transacted through the app within one annual year. After Tikkit, John went on to work under the COO of the oral healthcare firm Quip which has raised 62.9 million US dollars in funding. With his entrepreneurial background, John will focus on the growth and scaling of Triad. He will invest $20,000 in return for 10% equity with the chance of receiving an additional 16%, which will be vested in 4 years at a rate of 4% annually.    

24

Nate Abercrombie, COO  Hailing from Ocean City Maryland, Nate is a senior at Washington and Lee University who is double majoring in Business Administration and Politics. Before co-founding Triad, Nate worked for Larry Hogan’s Change Maryland Action Fund and was the state chair for the State of Delaware for Mock Convention. As a member of the Habitat for Humanity Fundraising board, Nate brings an understanding of

housing developments and how the housing market functions. Nate has also spent time as a business brand strategist, consulting for major corporations such as JetBlue. He also has a background in website development software, which combined with his aesthetic-mindedness will allow him to create Triad SmartHome’s website. He will invest $20,000 in return for 10% equity with the chance of receiving an additional 16%, which will be vested in 4 years at a rate of 4% annually. Advisory Board:  Jess Lohse 

Jess Lohse is a Havre, Montana-based entrepreneur, eCommerce savant, professional builder, and startup mastermind. He attended the University of Montana where he received both his undergraduate degree in Business Administration, and his MBA. He has since gone on to found several construction-focused companies, including Rocky Mountain Truss Co. and LBM Business Supplies. In addition to those, Jess has worked as a consultant for the gaming industry and as Vice President for Bear Paw Lumber. His knowledge of the

construction industry has been invaluable to Triad as the company navigates its way through its startup phase. Jeff Shay 

 Jeff Shay is a professor of entrepreneurship and leadership at Washington and Lee University. Professor Shay earned both a BS in Finance and Entrepreneurial Studies and MBA in Strategic Management from Babson College, and later received his PHD in Strategy and International Business from Cornell. He is the founder and owner of Shay Consulting International LLC, having worked with dozens of highly notable clients such as NASA, Four Seasons Hotels and Resorts, and Big Sky Brewing Company. He brings a wealth of experience and

knowledge to Triad SmartHomes, and has been integral in getting the company off of the ground.

25

Financial Analysis  Sources and Uses of Funds  Triad SmartHomes’ financing will initially be composed of $60,000 of owner’s equity ($20,000 from each of the three founders) as well as $90,000 raised from family and friends. The three founders’ $20,000 gives them each 10% equity with the opportunity to earn 16% additional equity fully vested in 4 years at a rate of 4% annually. The $90,000 invested from friends and family will be designated as a convertible note at a 8% interest rate to be paid back in full principal and interest in 5 years or transferred to a share of equity for every $300 given at a 20% discount rate. This total of $150,000 will be used to cover initial uses such as starting inventory, trade show presentations and website development. Triad will be further aided by a $300,000 infusion resulting from a SBA guaranteed loan at the start of year two. This loan will have an 11% interest rate and 36 monthly payments of $13,982.35. The added cash will be used to help offset rapid increases in inventory expenses. Given the fast rate of growth, the inventory constantly being filled for three months cuts deeply into monthly revenue.  Break-Even Analysis and Sales Projection  Three months prior to beginning operations, the company will focus on developing relationships with the building community in the Austin and Dallas-Fort Worth areas through attending the Dallas Build Expo trade show and networking through trade associations. During this period, roughly $24,674 in expenses are expected. Triad’s revenue will derive from its gold and silver packages, respectively priced at $2,500 and $1,300. Growth will derive from inroads made with the massive home building markets in the Austin and Dallas-Fort Worth areas. Throughout the expansion, four installation specialists will be added at the beginning of year two and eleven installation specialists will be added at the beginning of year three. Overall, sales revenue is expected to increase by 383% from year one to year two as well as grow by 298% from year two to year three. Triad expects to break even in month nine of year two. Net Income and Cash Flow  Triad is expected to start in an early development and, as a result, will see negative monthly net income until month two of year two. By the end of year three, the company will reach $609,899 in net income, up from $98,885 at the end of year two. The $300,000 infusion discussed above will be vital to manage early operating expenses. Closing cash will reach its lowest point of -$14,375 during month twelve of year one before beginning to trend upwards and become positive in month eleven of that year. Net cash flow will become positive in month seven of year three.

26

Ratio Analysis  Triad will rely heavily on the funding it receives from family and friends as well as the SBA guaranteed loan it hopes to receive at the start of year two to meet its projected financials. The most telling metric for the company’s longer-term outlook is its sales-to-assets ratio which is above 2 for all three years of projected business operations. In years one, two, and three, the sales-to-assets ratio is 2.56, 2.29, and 2.75, respectively. Triad also notes a ROI of -46.27% in year one, 33.44% in year two, and 76.76% in year three. In addition, ROA is projected as -33.33% in year one, 19.45% in year two, and 48.14% in year three. Additional metrics can be seen on the following page in Triad’s financial assumptions. The company is continuously working to increase its operational efficiency for the sake of improving its most critical metrics. List of Operating Expenses  Triad’s cost of goods sold will be 70.33% of sales for the gold package and 66.20% of the silver package during year one based on wholesale costs of the products being installed. The remaining 29.66% and 30.80%, respectively, will be the installation fee. As a result of a 5% price increase each of the following years, the cost of goods sold will drop to 63.79% for the gold package and 60.04% for the silver package in year three. COGS is composed of the wholesale costs of the smart home products, installation costs, travel costs, and wage costs. Additional operating expenses include the costs of trade show attendances, website development costs, rent costs, and trade association membership fees.                  

27

Financial Assumptions  

28

Monthly Income Statement - Year 1  

Yearly Income Statement  

29

Cash Flow - Year 1  

Cash Flow - Year 2  

 Cash Flow - Year 3 

30

Balance Sheet  

31

Appendix:  Exhibit 1: Defining the Business 

The figure above highlights some of the key characteristics of Triad SmartHomes’ business structure. The Resources and Stakeholders Needs sections of the diagram highlight the unique positioning that Triad finds itself in relative to other modern businesses. In addition, this diagram provides a succinct summary of Triad’s anticipated fundraising structure.

32

Exhibit 2: Generic Strategy

This diagram is useful for highlighting two key characteristics of the marketplace that Triad SmartHomes is entering. The first important aspect to note is the overall lack of competitors that Triad will face in the smart home subcontracting industry, as only three other legitimate competitors are currently operating. The second, more important aspect is Triad’s lone occupation of an untapped segment of the market: the cross-section between affordable pricing and housing development contracting.

33

Exhibit 3: Business Model 

Above is a model that indicates the key elements of Triad’s business structure. It is a useful map for visualizing the required inputs to create Triad, and simply lays out how Triad plans to do business.

34

Exhibit 4: Competitive Adv. Building Blocks

The above model captures the important aspects that go into Triad’s competitive advantages as a business. Its flexibility in terms of quality, and therefore price, is an asset that’ll allow the company to reach more customers. Additionally, the innovative nature of the business will dissuade too many others from attempting to utilize a similar schematic.

35

Exhibit 5: Porter’s Five Forces

This diagram is useful for showing the different market forces that are being applied to Triad. It makes clear that Triad is not free from the potential of new competition entering the market, and that the threat of substitutes could become high. The current lack of well-established industry rivals makes it important that Triad enters the smart home installation market now..

36

Exhibit 6: PESTLED 

The PESTELD analysis is useful to indicate many of the strengths associated with Triad’s business opportunity. For one, it benefits from not being susceptible to legal and political changes. Additionally, Triad is well-positioned to capitalize on technological, demographical, and environmental trends that favor it’s business model.

37

Exhibit 7: Value Chain Analysis  

   This model is useful for displaying the inputs that Triad plans to use to create value for all of its stakeholders. The supporting activities section highlights the physical inputs that will allow Triad to be successful, while the primary activities section displays what actions the company will be taking.

38

Exhibit 8: Installation Floor Plan Example 

 

39