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No More Holes

Business and Implementation Plan

Date: 13 March 2005 Plan b, Inc.

Andy KellyErin Layburn

Colter LeysChad Sachs

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SECTION 1: Executive Summary ������������������ 3 SECTION 2: Market Analysis �������������������... 4 Identifying the Problem �������������������� 4

Background on the Maharashtran Farmer ����������... 4 The Low Cost Water Storage System and Bag ���������. 4 Leakage Problems ���������������������.. 5 Alternative Product Markets ����������������.... 6

SECTION 3: Competitive Analysis �����������������... 7 Competing Patch Technology �����������������.. 7

Competing Installers ���������������������. 7 Competing Repair Services ������������������.. 7 SECTION 4: Product Solution �������������������.. 8

IDE Product Details ���������������������.. 8 Description of Plan b Solution �����������������. 9 Uniqueness of Plan b Product �...��������������� 10 Manufacturing �����������������������.. 10

SECTION 5: Plan b Service Model �����������������... 12 Distribution and Value Chain �����������������... 12

Partnership with IDE �������������������.... 12 Value Proposition to IDE ������������������. 13 Flow of Bags and Warranty �����������������. 13

Value Proposition to the Dealer ���������������. 13 Flow of Installation and Repair Services �����������.. 13 Repair and Maintenance ������������������. 14 Value Proposition to the Farmer ��������������� 15

Additional Concerns about Plan b Product ��������������

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SECTION 6: Marketing Plan �������������������� 17 Stage 1: Collaboration with IDE ����������������.. 17 Stage 2: Diversification �������������������� 18 SECTION 7: Organizational Structure ���������������� 19 Organizational Design ��������������������.. 19 Staffing �������������������������� 19 Training and Quality Control �����������������... 20 Service Agent Pay ���������������������� 20

Table of Contents

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SECTION 8 Financial Analysis �������������������. 21 Summary �������������������������... 21 Revenues �������������������������... 22 Market Assumptions and Penetration ������������� 22 Warranty Price ����������������������.. 23 Costs ���������������������������. 23 Cost of Repair Kits ���������������������. 23 Labor Costs ������������������������. 23 Water Bag Refill Costs �������������������.. 24 Fixed Costs ������������������������.. 25 Cash Flows ������������������������... 25 Social Returns �����������������������... 26 Summary �������������������������.. 26 Alternative Case Analysis: The Pessimistic and Upside Cases ����� 26 SECTION 9: Critical Risks ��������������������... 28 IDE Partnership ����������������������� 28 Intellectual Property .................................................................................... 28 Labor Costs ������������������������.. 28 Purchased Refills ����������������������.. 28 SECTION 10: Timeline ����������������������.. 29 SECTION 11: Appendices ���������������������. 30

Appendix 1: Map of India 30 Appendix 2: Full Financial Model ���������������� 31 Appendix 3: Photographs from the Prototyping Process �������. 33 Appendix 4: Plan b Management Team Bios �����������.. 36 Appendix 5: Selected Sources �����������������. 37

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Maharashtra is one of the driest regions in India. There are an estimated seven million farmers who do not have reliable access to year-round water supply. They are forced to generate all of their income in the monsoon and winter seasons and live off their savings in the summer season. International Development Enterprises-India (�IDE�) has done an excellent job of addressing the needs of many farmers who barely survive on $1/day. Their effective, appropriate technology, such as the micro-drip system, helps farmers conserve water and grow crops more effectively. IDE�s newest addition to their comprehensive water system is a 10,000 liter water storage bag that is designed to last two years and help farmers store water for use in the dry, summer season. The bag currently costs $37 and is intended to generate additional, incremental income for poor farmers of $130 over a two-year period. Given the income potential, the bag would be very helpful for many farmers; however, it suffers from one major problem�it leaks. Although IDE is working hard to produce a high quality bag, pinholes and leaks are almost inevitable. In order to reach the $37 price point, the bag design necessitates a durability trade-off. Add to this the possibility of damage from manufacturing, shipping and handling, installation and general wear and tear, it makes a tremendous amount of sense to factor in a repair element to the storage bag business. Plan b has designed a mechanical repair product and comprehensive service model that will guarantee the reliability of these water storage bags. The mechanical repair product is a new low-cost design that provides �no-fail� sealing. The patch can be used on bags constructed of a wide range of materials and is easy to install, requiring the bag to be neither dry nor clean. The patch can also be reused and is largely unaffected by the extreme environmental conditions of the Maharashtra region. Given the multitude of ways that holes can occur in the bag and various types of holes, Plan b has also complemented its innovative product with a comprehensive service that will both install and repair the bag for the low cost of $5. Plan b, a for-profit entity, intends to hire over 300 new local employees to build a high quality service team. It will partner with IDE-India, helping IDE to improve the product for their customers and ensuring IDE�s reputation in the field. By making IDE�s bag a more viable product, Plan b will ensure that over 350,000 farmers have the chance to access $45 million of additional income, helping them escape the clutches of poverty.

Section

1 Executive Summary

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Identifying the Problem Background on the Maharashtran Farmer Maharashtra is one of the largest states in India with over 100 million people. Approximately 60% of the population lives in rural areas and approximately 12.5 million people live below the poverty line.1 Even for farmers that do not necessarily live below the poverty line, life in rural Maharahstra is difficult as they are forced to survive on the dry lands of the Deccan Plateau.

There are approximately 7 million farmers whose families do not have access to a reliable, year-round water source.2 Many farmers either do not have wells, have to share their wells with family members, or suffer from a well that goes dry in February or March as the summer season arrives. These farmers need a more secure water source to continue producing crops in the dry, summer season. The Low Cost Water Storage System and Bag International Development Enterprises (�IDE�) has developed a water storage and low-cost micro-drip irrigation system to help farmers overcome some of the challenges of farming in Maharashtra. The micro-drip system is working well and IDE has successfully grown its sales over the last few years by 10-20% annually. In Maharashtra, IDE has sold drip-kits to over 30,000 farmers and intends to sell 8,000 in this year alone. 1 Jha, Raghbendra. �Rural Poverty in India: Structure, determinants and suggestions for policy reform�, pg. 5. 2 Based on conversations with IDE-India. Average family size is around 5. 60% of the population lives in rural areas. 60% of these farmers do not have access to reliable, year-round water access.

Section

2 Market Analysis

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Adding to its offering, IDE has now shifted its focus to developing a more reliable water storage bag that can help provide water in the summer season so the farmer can continue to use his micro-drip irrigation. The bag currently is designed to hold 10,000 liters and last for a minimum of two years. The IDE bag is intended to hold water that can be obtained during the monsoon or winter season. The farmer may collect this water for free from rainwater harvesting (by roof or pond collection), from a water tanker or from his well, if it is not completely dried out. This water will be held in the IDE bag until the summer season and, when all other options are unavailable or have increased in price, the farmer can use his stored water to grow crops and sell them at inflated prices, resulting from the shortage of supply due to the dry weather. The water bag is a critical piece in providing the farmer an opportunity to earn around $40 of additional income in the first year (net of bag cost) and $90 in the second year (assuming no cost for a bag or other capital cost replacements).3 At $37 US or 1600 Rps, the bag is highly competitive with other alternative bags. The nearest bag alternative is closer to $100 and not readily available. Currently, most farmers have to rely on alternatives such as Sintex tanks or ferro-cement tanks that cost 6-25 times as much. IDE estimates that the market for the water storage bag is much larger than the drip-kit system because only the poorest farmers are compelled to buy the micro-drip but poor farmers and middle class farmers will want to buy the bag to compensate for unreliable and declining water sources. Leakage Problems Despite being a critical component of the IDE system, the water storage bag has a significant problem � it leaks. The bag has been through many prototypes but continues to leak significantly. Chad Sachs and Yves Vanden Hende, summer analysts with IDE, installed five bags in India and 100% leaked. During testing, Plan b filled up another IDE bag�it had ten holes along the seam and was empty within a day. The natural question arises, where do these holes come from?

Various Causes of Holes in Bag

Manufacturing Transport Installation Wear & Tear Manufacturing Problems: Many of these holes stem from a poor manufacturing process and material selection issues. The mix of LLDP (low linear density polyethylene), LDP (linear density polyethylene), HDP (high density polyethylene) and carbon creates various strengths and weaknesses of support. Given the large size of the bag and tubular nature, it is also hard to blow-mold a consistent, perfect bag. IDE is working with

3 Based on crop yield/water consumption analysis provided in Sachs and Vanden Hende, �Next Steps on Water Storage,� August 2004, pg. 26, income potential from tomatoes grown during the summer at a wholesale market price of 6 Rps.

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manufacturers in India to resolve these problems. There is a good chance that most of the holes resulting from inferior manufacturing processes and materials selection will be resolved. Transportation: The bag is often damaged in the transport from a manufacturer to a dealer. The bag is not properly rolled; the outer covering of the bag may not be sufficient; the transport vehicle may not be properly padded when trying to reach the farmer. Installation: Once the bag reaches the farm, there are still numerous chances for pinholes to develop as the farmer/dealer tries to install the bag. The bag can be dragged across thorns; rocks and sticks in the trench can pierce the bag; the bag can be damaged while rolling it out. Wear & Tear: Once the bag is safely in the trench and filled with water, the natural environment may threaten the viability of the bag. Sun and heat may cause the bag to become more vulnerable to tears; rodents and pests likely will try to gnaw into the bag; children or animals may accidentally pierce the bag. Wind and rain may blow other foreign objects onto the bag in a harmful way. The bottom line is that holes are inevitable and any company selling the water bag (IDE or a dealer) will have to warrant that the bag is reliable. Unlike the drip kit, where a single hole does not jeopardize the entire system, one hole in the bag does indeed undermine the entire bag. IDE is currently working on the manufacturing and transport problems; however the installation and wear & tear remain to be addressed. Alternative Product Markets In addition to the bag needing to be repaired, there are other plastic products that contain water or gas that are used in the developing world by people living on a dollar a day. For example, there are:

- inexpensive plastic biodigesters in Asia to produce gas for cooking and effluent for pond fertilizers;

- communal ponds that use plastic lining to line the bottom and prevent as much percolation as possible;

- plastic sheeting for thatched roofs - boating materials for canoes and kayaks - hoses for agriculture - bike parts and tires - auto parts that use plastic materials

We have not focused on these markets, but they represent additional sales opportunities and potential upside for any repair kit that might be used to fix IDE�s water bag.

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Given that Plan b�s business is a service model based on a physical patching technology, we foresee competition on three fronts: Competing Patch Technology Perhaps our largest competitor is �yellow tape.� Yellow tape is a cloth type tape used for a variety of purposes, but recently has become the default when repairing the existing 10,000L storage bags. Its low price and wide availability are the primary drivers behind its use. Yellow tape currently costs approximately $4.50 for a 55 meter roll � with an average use length of 25cm; the applied cost is $0.02 per hole. The obvious problem is that it is extremely unreliable. Assuming the 10,000L bag is clean and dry to begin (an unlikely assumption), it usually is only effective for up to a week. Given the reality of dirt and water in the field, yellow-tape�s effectiveness is drastically reduced.

There are also a variety of patching technologies used on products apart from the 10,000L bag. These technologies are primarily based on glues or epoxies and are coupled with some type of patch medium. Epoxy based products can be quite effective but, similar to yellow-tape, require a clean, dry surface to properly seal. In addition, these technologies require extensive drying time�anywhere from 2 to 24 hours. This implies that the bag cannot be used until the glue/epoxy is dry. The cost of these technologies varies widely�some of the cheaper adhesives range from $0.02 to $0.08 per use (assuming 10mL per use) while the more durable adhesives can cost up to $0.25 per use. Since IDE�s bag is still in development, its constituent materials, surface finish and thickness may change. As glues are specially formulated for the material and surface they are going to be used upon, glues for the patch kit become a moving target.

Section

3 Competitive Analysis

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Competing Installers A key component to Plan b�s business is the installation service for the 10,000L bags. There are nascent installation businesses for the IDE drip kit systems that feasibly could compete with Plan b for the storage bag installation as well. Currently these installation businesses are locally based and fairly segmented, but as drip kit and storage bag sales increase they certainly could become more organized. We hope that our positioning with IDE and our economies of scale will stave off this competition. Competing Repair Services The third segment of our business is the warranty/repair service offered with the bag. Should the bag leak during the two years after purchase, Plan b will provide a repair service capitalizing on our patch technology. Competing repair services utilizing alternate patch technologies could pose a threat to Plan b�s business. No such service is currently in existence, but this is due to the fact that the 10,000L bag has yet to be rolled out. We see the current drip kit installers as the natural extension of our competition in the repair field as they already have customer relationships in place.

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IDE Product Details

The current IDE water storage bag is 10,000 Liters. It consists of three layers�a High Density Polyethylene (HDP) layer sandwiched between two Low Density Polyethylene (LDP) layers.

Cross Section of IDE 10,000L Bag

LDP (50 microns) HDP (50 microns)

LDP (150-200 microns)

The LDP bags are extruded and then laminated together with the HDP core. After the IDE bag is manufactured, it is cut to an 11m length, rolled and shipped in a corrugated box to IDE�s dealer network. At installation, PVC inlet and outlet pipes are added, attached with bicycle tubes and clamps.

Section

4 Product Solution

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According to interviews conducted with IDE staff members, they are experimenting with replacing the inlet and outlet pipes with one screw-on cap (similar to a screw on manhole cover). At present, the IDE bag costs 1600 Rps (~$37). Path to the final Product Plan b experimented with over 40 different mechanical solutions and 30 different glue/patch combinations. The prototypes allowed us to see that glues and patches often relied on a bag that was clean and dry. These patches, while often highly successful and used in real world applications such as white water raft repair, require preparation of the surface and drying time before they can be tested. While water-proof epoxies and glues exist (mostly from the swimming pool industry) they are generally substantially more expensive than traditional glues. There are many possibilities but our product spec pushed us toward solutions that:

� were not adversely affected by harsh environmental condition and would stand up to at least two years of continuous usage.

� allowed the patch to be applied to a bag still filled with water � provided a seal that would limit propogation of gash-type rips Description of Plan b Solution Plan b�s final iteration of its first product, the �Clincher�, seals holes in the 10,000L water storage bag in both wet and dry conditions. The oval design allows for insertion into the bag even when it is still filled with water. The domed shape provides a natural spring and focuses the force of the wing nut along the sealing edges. The duel channels along the Clincher�s edges force the bag through a series of curves which provide for a tight seal. The Clincher seals a variety of holes up to three inches long. Two different views of the Clincher are seen below.

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Key Features of the Clincher: • Mechanical solution eliminates the need for a clean, dry surface • Oval shape allows the patch to be retroactively installed even if the bag is still

filled with water • Stamped metal construction minimizes wear and provides great resistance to

temperature and long term relaxation of the sealing surfaces • Clam shell design adds structural stability • Duel channels along the edges ensures a tight seal • Works on any wide variety of materials and surface finishes • Use of stamped metal and commercially available threaded stud and wing nut

keeps manufacturing costs ultra low • Sized patches allow for lowest material cost to holes patched ratio

Uniqueness of Plan b�s Product Plan b�s patch kit is a mechanical solution while our competition requires glues and epoxies. The unifying theme of all our competitors is that they require a clean dry surface in order to be effective. The storage bag needs to be empty, the surface needs to be cleaned and prepared, and a significant amount of drying time needs to allowed for � anywhere from 2 to 24 hours for the more sturdy epoxies. The yellow tape (perhaps our biggest competitor), which requires no drying time, is little more than a temporary solution. The application of Plan b�s patch kit is simple. Once a hole is found, the proper patch size is determined, inserted in the hole, and then clamped down to seal the leak. The oval design of our patch eliminates the need to empty the bag or gain access to the inside. The clamp will seal regardless of dirt or water and once sealed is impervious to UV radiation and wear and tear. Because no drying time is needed, service representatives can demonstrate to the customer that the problem has been fixed on the spot. Our mechanical solution is simple for repair people to understand and provides a solution that can be reused even after the bag is discarded. Since the patch will last longer than the two year minimum spec, there is a high likelihood that the patch can be used to extend the life of the IDE bag beyond two years, allowing farmers additional income at very low cost.

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Manufacturing The Clincher is made from four components: � Upper Clam Shell � Lower Clam Shell � Threaded 1/4-20 Stud (or metric equivalent) � 1/4-20 Wing Nut (or metric equivalent) Of these components, the upper and lower clam shells will be manufactured, while the threaded stud and wing nut will be purchased as stock items. As our financial model calls for 180,000 units by year two, we will gain considerable discounts on the stock items and will have the clam shell tooling costs assumed by the manufacturer. Plan b would contract with a manufacturer to have units made and sent out to Service Agents. Our hope is to develop a strong relationship with our manufacturer and leverage the manufacturers sourcing and distribution networks to get the most for our farmers� money. The clam shells are designed to be stamped out of low cost galvanized or recycled �pig� metals. As the forces involved with creating a seal with the clam shells are low, the material does not need to be highly structural or pure. Initial designs call for 22 gauge material, although this might change depending on the final design of the IDE bag. Tooling costs for stamped metal parts are very low in India. Sally Madsen of Ignite Innovations recently had tools made for a small stamped heat sink (1�x1� x 1/4�). The tool cost 500rps [$12.50]. Obviously our part is larger and more complicated but this gives an order of magnitude comparison. Sally also confirmed that Indian manufacturers often assume tooling costs when over 100,000 units are ordered. Materials would most likely be sourced by the manufacturer; this would guarantee the lowest cost both for material and transportation to the manufacturing facility. All manufacturing would be done in country and since stamping is relatively low tech, could probably be done in the larger metropolitan areas within Maharashtra itself.

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Threaded studs and wing nuts would also be sourced in India. These parts would be readily available in large manufacturing hubs. Sourcing would be coordinated through our manufacturer. The final step in manufacturing would be to weld the threaded stud into the lower clam shell. This would be accomplished by a low-level manufacturing employee with a stud welder (a machine that provides a set amount of current at the pull of a trigger making the welding process relatively unskilled and extremely fast). Selection of a manufacturing partner would be made easier by our relationship with IDE. Manufacturers of current IDE products would be valuable in pointing us to reliable manufacturers. Because we are associated with IDE, manufacturers will be more willing to work with us as our product represents a constant revenue stream for them.

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In order to gain a full understanding of Plan b�s business model, it is important to realize that Plan b is not just selling patch kits, but a full installation and repair service. Distribution and Value Chain The following figure shows the relevant stakeholders in the Plan b value chain and the path that goods, service and money take along this chain. Each link in the chain is discussed in more detail in the sections below.

The Plan The Plan b Service Modelb Service Model

DealerDealerIDEIDE FarmerFarmer

Plan Plan bb

BagBag ++WarrantyWarranty

BagBag ++WarrantyWarranty

Installation Installation & Repair & Repair ServicesServices

Service Service CallsCalls

WarrantyWarranty

$$$$

$$$$

$$$$

Goods and Services Exchanged:Goods and Services Exchanged:

Partnership with IDE The first step in the value chain is establishing a partnership between IDE-India and Plan b. As part of this partnership, IDE will incorporate the price of Plan b�s warranty, installation and repair service (initially an additional $5) into the price of the bag. At the outset, it is important to package the warranty with the bag before it reaches the customer. Although we believe the warranty provides significant value to IDE, the dealer and the farmer, we are concerned that farmers initially will not be inclined to purchase the warranty for several reasons. First, they may be skeptical of a product that is already making them �pay more to have it work.� Secondly, in rural India, the idea of purchasing an �insurance policy� against leaks is not yet common, particularly for people struggling to stay out of poverty. Finally, we would expect the early adopters to be wealthier farmers who can afford to take more risk and purchase a more expensive bag. As the bag

Section

5 Plan b Service Model

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is establishing a reputation and gaining acceptance, we would effectively be hiding the cost of the warranty in the general price of the bag. IDE and Plan b will have an agreement to collaborate on sales. Working together, IDE will leverage off of its existing dealer network and marketing efforts, in exchange for a product and service that ultimately will guarantee the success of the 10,000L storage bag. Plan b will receive instant credibility and a sizable customer base. After two years, once the brand equity and relationships with the local dealers are established, Plan b expects to work more directly with the dealers and probably offer an optional warranty package. The optionality would bring down the price of the bag allowing some poorer farmers to purchase the bag with no warranty, albeit at much greater risk. See Section 10, �Timeline,� for more information. Value Proposition to IDE IDE currently is struggling with the quality/cost tradeoff of their 10,000L bag. Prototype testing has shown that the bag develops many holes and without adding a substantial price increase, it does not appear that all of these holes can be mitigated (especially holes created during the installation and use of the bag). As such, Plan b is uniquely positioned to add value to IDE�s product by increasing the quality through efficient repair technology; upholding IDE�s reputation for high quality products, and maintaining a low cost for the IDE 10,000L bag. Flow of Bags and Warranty IDE 10,000L bags and Plan b warranties will flow down the distribution chain as shown in the Figure above. Once IDE has purchased the services of Plan b, the IDE bag and the Plan b warranty will flow together from IDE to their local dealer and then on to the end user, the farmer. It should be noted that the farmer will interface with the local dealer, someone they already have an established relationship with and trust. When the farmer purchases the bag, schedules the installation, and returns to report holes and schedule repairs, they will interact with their dealer who will then contact the Plan b Service Agent. Value Proposition to the Dealer The dealers that IDE currently works with are expected to bear much of the risk of the IDE bag. If the bag were to break or rip after the dealer has sold it to the end user, this is now the responsibility of the dealer. As such, Plan b�s service model is able to mitigate the risk associated with selling IDE bags since Plan b repair personnel will handle all after-sale repairs and will increase the reliability of the bags therefore increasing sales and profits. Flow of Installation and Repair Services When a farmer initially purchases an IDE bag, the dealer schedules a time for Plan b�s Service Agent to do the installation. We would expect the average range for a Service Agent to be a 50km radius area. A service call at the very end of this range would probably take about an hour to an hour and half to reach. For installations, the Service

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Agent would probably rely on the bullock cart of the farmer to transport the bag from the dealer to the farmer�s house. The Service Agent is responsible for digging the ditch to spec (or having it dug), removing rocks and sharp objects, cutting back and sealing any roots, and padding the bottom of the ditch with soft dirt. Once this is done, he is then responsible for completely inspecting the interior of the bag for any pinhole leaks and tears. Should he find any, he will use Plan b�s repair kits to seal the holes. Should there be more holes than patches; the bag will be returned to IDE for replacement and a replacement left with the farmer. Finally, the install rep is responsible for laying out the bag and sealing the ends. At this point the installation service is complete. Repair and Maintenance From this point to the end of the two-year warranty, Plan b is also responsible for any �reasonable� subsequent damage to the bag. Should there be any damage during this time, the farmer will contact the dealer and let him know there is leak. The dealer will then contact the same Plan b representative and notify him of the problem. All Service Agent visits will be scheduled through Plan b�s offices. One of the key advantages of having a �repair service� rather than a set patch kit packaged with each bag sold is that the Service Agent will have a set of patches in different sizes and shapes that will allow him/her to service a customer effectively. The Service Agent will be able to keep costs lower for the overall system. Statistically, since he is serving multiple units, he will only need to have a limited set of repair kits to service many potential types of holes; versus individual users each buying their own repair kit when they likely will only need a few of the patches. This Service Agent is then responsible for traveling out to the farm and using Plan b�s repair kit to fix any new holes. Agents have their own motorbike for transit and could carry the repair kit on their bike. The design of our repair kits allows for installation while the bag is full of water should the tear be toward the top half of the bag. Should the hole be inaccessible, the rep will need to pump out the remaining water into a temporary storage tank, fix the hole, and then replace the water. Plan b�s expectation of their field employees is that they find the most affordable way to pump out the water. Potential solutions would include using a nearby well and pumping water temporarily into the well, using a smaller, older bag that the service rep could carry with him and pump out the water into; or using locally available jerry cans or metal buckets as temporary water storage devices until the bag is repaired and the water is pumped back into the bag. There is also the possibility of emptying the bag, fixing the holes and having a tanker truck come and fill back up the bag. In reality these solutions will need to be dealt with on a case by case basis. In order to build up a decent reputation, it is our assumption that Plan b will be purchasing quite a few refills (currently 35% of bags sold) for the first few years of operation. It is our hope that with time we will be able to minimize these refills as product quality increases,

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installation procedures are refined, and we are on a better financial footing to take a firm line with our customers. The Service Agent would only be obligated to service the farmers that could show proof of purchase of the warranty. In the first two years of operation, all bags would come with a certificate showing the warranty. After the first two years, as we begin working more directly with the dealers, farmers may have the option of purchasing the warranty, but in all cases, Plan b Service Agents would have records of who had purchased the warranty. There is a potential risk that warranties would get passed around, but given the close relationship with the dealers and the fact that our reps did the installation, our reps should be able to keep track of who was an authentic buyer of the warranty. Over time, we would hope that people would call Plan b to take care of repairing the bags of IDE competitors. We would have a set fee for this type of service, probably charging around $5 for a repair. This aspect has not been considered in our current financial model. Value Proposition to the Farmer: It is easy to make the financial value proposition for buying the IDE bag as seen below:

Value to the Farmer of Having a 10,000L Storage Bag Incremental Income in Year 1 $77

Cost of Bag ($37) Incremental Income in Year 2 $90

Total Gain $130 This analysis is based on the assumption that the bag will work for 2 years in the difficult conditions in rural India. At the current time, this assumption does not hold true for IDE and the farmer. Plan b is able to add value to the farmer by ensuring that the bag will hold for 2 years so that the farmer can recoup their investment and increase their farm productivity and income. This can be done at a minimal cost to the farmer of approximately $5 or approximately 4% of the expected total gain from purchasing the 10,000L bag. The possibility also exists, and will be determined through further testing, that the Plan b repair kits will not only assure the bag�s functionality of the IDE bag for 2 years but could also extend the effective lifetime of the bag allowing for additional incremental income. It is also important to note that there are currently no viable alternatives in the market for the farmer to use in repairing the IDE bag. Additional Concerns of Plan b Product Why not just design a bag that doesn�t leak? This is exactly what IDE engineers are attempting to do. The issue of course is one of cost. As it stands IDE has two guiding principles � the bag needs to be 10,000L and the final cost cannot exceed $25. This leaves one degree of freedom to work with and that is product quality. Indeed there are materials better suited to the task than polyethylene (PE), but they can cost orders of magnitude more. Various PE thicknesses are currently

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being tested, but once again we reach a cost wall after a certain thickness. The bottom line is that leaks are inevitable. Even if product quality were along the lines of similar military water storage bags (costing around $2,200) leaks are to be expected.

How do we deal with different types of holes (pinholes, rips, long/short, etc) Our patch-kits have their limits. They will be able to mend any hole three inches long or less. This should encompass the majority of holes that we see. For longer tears, we will need to return the bag to the manufacturer to be fixed or replaced. If, during an install, more than 5 Plan b patches are used the bag will be deemed a lemon and sent back to the manufacturer. The manufacturer and/or IDE will be responsible for this cost. How do we design a solution for a product that is still undergoing design changes? Our patch kits are a mechanical solution. They are effective on a wide range of material and thicknesses. Obviously, we would continually test and update our design for optimum performance with IDE�s most current bag construction.

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Plan b�s approach to marketing will proceed in stages as the strategy of the organization changes. Throughout Plan b�s rollout, the marketing message will remain consistent and will emphasize the values of:

Stage 1: Collaboration with IDE Key Objectives

• Use IDE�s network to build customer base and reputation • Emphasize product quality and effectiveness • Establish relationships with dealer network

Strategies for Marketing/Promotion: At the outset of Plan b�s launch, we will be working closely with IDE in their marketing and distribution of the 10,000L water storage bag.

• Reach out to early adopters, prove product to them and get them on board o Identify key stakeholders in community and work closely with them o Product demonstrations or demonstration farms to show how system

works • Establishing and maintaining trust

o Especially at the outset, must ensure that repairman are well trained and that service people and Plan b respond quickly and efficiently to any complaints or problems.

o Work to establish closer relationships with dealers since they are point of contact to end users

• Create buzz around product with IDE o Traveling shows or singer/storytellers to reach out to villagers

One on One ServicePrompt, personal

attention if problems do occur

ReliabilityEffective and consistent

product performance

Trust Local dealer is trusted point of contact with pre-established

relationship

Section

6 Marketing Plan

Trust

One on One

Service

Reliability

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o Radio advertisements which have the potential to reach a broad audience at low cost

o Printed materials such as pictorial postcards that are placed in high traffic areas (bus or train stations, churches, schools)

Stage 2: Diversification Key Objectives:

• Continue relationship working with IDE • Use dealer network to diversity to other product markets outside of IDE bag • Continue to build and expand brand recognition and reputation

Strategies for Marketing/Promotion:

• Continue with previous marketing efforts with IDE • Rely more heavily on word of mouth since reputation is established • Poster campaign with local, movie star or TV actor/actress. Place posters in high

traffic areas.

21

Organizational Design Plan b�s mission is to be the best repair and maintenance provider for flexible plastic products while creating local employment and development. At this start-up phase, the internal company motto/rallying cry has unofficially become �Save the Bag�. Plan b will be structured as a for profit entity. We believe strongly in not giving �handouts� to the poor but providing them with appropriate and affordable technologies that will increase income generating possibilities. Plan b will work in collaboration with IDE in the short term in order to establish market penetration and brand recognition. After establishing positive cash flows and relationships with dealers, Plan b will roll out to other geographies and products and work more independently. Staffing: Management team: The Plan b management team currently consists of Erin Layburn (CEO and founder), Andy Kelly (CDO4 and founder), Chad Sachs (CRC5 and founder) and Colter Leys (founder)6. Bios are available in Appendix 4. Staffing: Plan b will hire a large base of local labor to serve as our installer/repairmen. We are currently assuming that service people can do two service visits each working day (300 working days in a year). We are assuming that each service person will service an area with a radius of approximately 50km. Therefore, relying on their own motorbike, the transportation times to service two �service calls� does not seem unreasonable. Realistically, service calls (both installations and repairs) will not be evenly distributed throughout the year. There may be times where there is a backlog of calls or a common event (huge storm, rampant pest outbreak) that damages several bags at once. However, we do not foresee an installation or repair event as being a �stat� emergency. Farmers need to have a bag that will last two years. If the bag breaks, we would always aim to repair the bags as soon as possible, but if we truly had a backlog, we might consider covering more of the water lost and see an increased cost of water replacements. Our initial view is that since the �backlog� costs are lower than the excess capacity costs of hiring staff, it will be cheaper to keep the labor force lower and pay water refill costs. Over time, we would have to see how costly this approach was and potentially in high season, i.e. in January and February, when many farmers decide to buy water saving technologies, we would hire temporary help to increase capacity and reduce queuing issues. Hiring locally accomplishes several important aims both financially and socially. Financially, it is advantageous to employ local labor due to the low labor costs in India. A

4 Chief Digging Officer 5 Chief Rupee Counter 6 Currently working pro bono since the company cannot afford to hire another founder. He is receiving cash on the side from the Motion Picture Association to produce a documentary called �Cliff of Poverty�

Section

7 Organizational Structure

22

local labor force will also have the advantage of knowing the local customs, local soil conditions important in the installation process and transportation to different sites. On the social side, by employing local labor Plan b will be able to increase the economic development of the areas � not only through our product but through our service model as well. Labor is one of the largest costs in our financial model due to the service component of our business plan. It will grow dramatically as the number of installations increases as the demand for the bag and our repair service grows.

Service Employees Required

13

153

290

389

333 335

-

50

100

150

200

250

300

350

400

450

2006 2007 2008 2009 2010 2011

Empl

oyee

s

Training and Quality Control: Our business will hinge on the quality of our service staff. We would expect to train them well and significantly emphasize quality control. We are also experimenting with pictorial training models that clearly underscore the important components of repairing the bag and can serve as a reference manual to our service people. Service Agent Pay Agents will be paid in the form of an annual salary rather a per service trip pay structure. We would use feedback from local dealers and farmers to give an annual bonus to our most helpful, hardworking Service Agents. We are hopeful that this system will incentivize our repair men to provide the highest level of service without thought to the total number of repairs performed.

23

Summary Income Statement 2006 2007 2008 2009 2010 2011($ in 000s)

Revenues 25.2$ 322.2$ 638.8$ 900.0$ 808.6$ 855.6$

Variable CostsRepair Kit Costs 4.0$ 51.4$ 101.9$ 143.5$ 129.0$ 136.5$ Labor Costs 12.6 161.1 319.4 450.0 404.3 427.8 Distribution Costs 0.0 0.4 0.7 1.0 0.9 1.0 Water Refills Costs 6.2 79.0 156.5 220.5 198.1 209.6

Total Variable Costs 22.8$ 291.8$ 578.6$ 815.1$ 732.3$ 774.9$

Gross Profit 2.4$ 30.4$ 60.3$ 84.9$ 76.3$ 80.7$ Margin 9.4% 9.4% 9.4% 9.4% 9.4% 9.4%

Fixed CostsMarketing 10.0$ 12.1$ 14.6$ 17.7$ 21.4$ 25.9$ Rent 4.2 4.2 4.2 4.2 4.2 4.2 Incorporation Costs 0.3 - - - - - Administrative (Salaries for HQ) 15.0 15.8 16.5 17.4 18.2 19.1

Total Fixed Costs 29.5$ 32.0$ 35.4$ 39.3$ 43.9$ 49.3$

Operating Income (27.1)$ (1.6)$ 24.9$ 45.6$ 32.4$ 31.5$ Margin N/A N/A 3.9% 5.1% 4.0% 3.7%

Cash FlowBeginning Cash Balance -$ (27.1)$ (28.7)$ (3.8)$ 41.8$ 74.2$ Annual Cash Flow (27.1)$ (1.6)$ 24.9$ 45.6$ 32.4$ 31.5$ Ending Cash Balance (27.1)$ (28.7)$ (3.8)$ 41.8$ 74.2$ 105.7$

$(40.0)

$(20.0)

$-

$20.0

$40.0

$60.0

$80.0

$100.0

$120.0

2006 2007 2008 2009 2010 2011

($ in

000

s)

Operating Income Ending Cash Balance

Section

8 Financial Analysis

24

Revenues Market Assumptions and Penetration Although we are offering a product and service, our revenues are simply generated by the number of warranties sold. In the first two years, we are predicting that 100% of IDE�s bags will be sold with our warranty. Therefore, the volumes depend significantly on expectations about the market penetration that IDE will have with their water storage bag. We spoke to IDE-India about their expectations in Maharashtra, and they were not able to provide clear guidance on market penetration at this stage; however, they helped us derive a target market of families that are potential buyers.

Base Case 2006 2007 2008 2009 2010 2011

Market Assumptions(# in 000s)

Population in Maharashtra 100,000 102,500 105,063 107,689 110,381 113,141 Growth . 3% 3% 3% 3% 3%

Rural Familes in Maharashtra 12,000 12,300 12,608 12,923 13,246 13,577 Avg. Family Size 5 5 5 5 5 5 % in Agriculture/Rural Areas 60% 60% 60% 60% 60% 60%

Families w/ Drip and Poor 7,200 7,380 7,565 7,754 7,947 8,146 Growth 2% 2% 3% 2% 2%% of Farmers with Unreliable Year-round water source 60% 60% 60% 60% 60% 60%Density of People per SqKm 315 315 315 315 315 315

Farmers with Bag 5 66 227 388 417 448 % that Own Bag 0.07% 0.90% 3.00% 5.00% 5.25% 5.50%

New Bag Buyers 5 61 161 161 30 31 Growth 1118% 162% 0% -82% 4%

Repeat Bag Buyers (2 yr duration) 0 0 5 61 161 161 Growth N/A N/A 1118% 162% 0%

Total New Bag Purchases 5 61 166 222 190 192 Growth 1118% 170% 34% -14% 1%

Our penetration of the targeted 7 million families that do not have access to reliable, year-round water sources is based on IDE�s current success with the drip. In IDE�s opinion (both Paul Polak�s and IDE-India�s), the potential customer base of the water storage bag is much larger than the micro-drip system because many wealthier farmers with wells and larger pieces of land will not want the ultra-cheap drip system but will still want the bag to remedy their dry well situation in the summer. Keeping this in mind, IDE in Maharashtra currently has 38,000 customers of the micro-drip system. In the first year, we are only predicting that 5,000 farmers will adopt the bag. By 2011, we are expecting approximately 450K farmers to have bought the bag, which is around 4.5 times the number of farmers who are expected to buy the IDE drip-kit. We do not think this is aggressive given that:

1) there should be more buyers of the bag than the drip system, and 2) there will likely be other buyers of non-IDE micro-drip systems by 2011.

Revenues will come from:

1) farmers buying new bags, and 2) farmers buying a replacement bag when their bag wears out after two years.

25

The fact that we only receive revenues only when new bags are purchased means that revenues will be somewhat cyclical. We will receive growing orders for new bags and then expect a short fall-off given that we are estimating that IDE�s penetration will plateau at around 5.5%. At this stage, we would expect new �copycat� bags to arrive and limit IDE�s competitive advantage. We would hope to help some of these new players with their repair needs but did not assume we had this relationship. Over time, we would hope that Plan b can establish a good relationship with dealers and not just IDE so that when they do adopt and use other bags, we are in a position to be their reliable repairperson. To be conservative however we have not modeled this into our projections. If we do not establish these relationships or expand into new applications or geographic markets, the business may decline rapidly as the penetration of the bag market for IDE flattens. Warranty Price The current price for a warranty is $5. This price includes the service of installation, repair and any kits associated with that repair. It also may include the price of removing and refilling the water lost by a bag with a hole on the bottom, whereby the water has to be removed to repair the bag. We derived this price in two ways:

1) First, we looked at the price that the farmer would be willing to pay given his/her own opportunity costs of using a water storage bag. A $5 price amounts to 12% of the current cost of the bag ($37). The income generated by the bag for the farmer, however, is even higher. We are predicting that the farmer will generate additional income of $40 (net of all capital costs) in the first year and $90 in the second year. This opportunity cost is much higher than the requested $5 price.

There is also already some precedent in Maharashtra for paying installers to install IDE�s drip system for 200 Rps ($4.60). This payment is only for installation, whereas our warranty payment would cover much more.

2) Second, we looked at what it costs to produce the bag, the corresponding margins and the requisite price to make sure that Plan b could be run profitably. We estimate that the bag costs $1.25 to manufacture. We arrived at a $5 price to make sure that we, as a business, had enough margin and headroom to cover our costs, which are laid out below, and still make a profitable 4% operating margin. Costs The variable nature of the majority of our costs creates a relatively low risk business situation. We will make low margin, but most costs will not ramp up until we have more demand for the product. The major variable costs include: Cost of Repair Kits: We have assumed that each �repair kit��the unit of analysis for our financial models�can fix five holes and the manufacturing cost, including raw materials and labor to make the kit, is around $1.25 per kit. We have assumed an additional 10% margin for the manufacture. Repair kits will be needed in two situations. First, they

26

might be needed when doing installations, and second, they will be needed when a leak gets called in for servicing. We believe that IDE will work hard to make sure that the bag has few if any holes caused by manufacturing and transport. We have therefore assumed that there will only be an average of 2 holes per bag at the time of installation. Given that we are also doing the installation, we think there is less risk that a bag will be damaged before/during installation. Furthermore, we assume that only 20% of the bags will have the average 2 holes per bag. Having spoken with Paul Polak, IDE will probably not commercially release a bag that has holes in more than 1 out of 5 bags (20%). However, we assume that post-installation 50% of the bags will break and likely have five holes. If more of these bags break or, if when they do break they have more than five holes, we may end up spending significantly more on repair kits and not have them covered by the revenues. Labor Costs: These costs are by far our largest cost as they make up 55% of the total variable costs. We will need service people to go out for all installations and anytime a repair is needed. We estimate that a person can do roughly two jobs per day. Maharashtra is fairly dense � 315 people / sqkm. However, the roads can be difficult in the rural areas and two visits a day may be tough. We may also run into queuing problems in that people may have complaints all at the same time. As noted above, we will need to balance utilization and efficiency levels with the need for having excess capacity to handle over-burdened demand periods. Wage costs will also be an area to manage carefully. IDE-India indicated that they would expect to pay a repairperson or person who is in the field regularly helping farmers around $1,200 per year. As we do not think we need someone as skilled as IDE�s field managers, we have budgeted $900 to reduce costs. We also think there might be some opportunity to hire people part-time rather than full-time. One design advocate mentioned that there are many people who provide bike and auto repair assistance. We might be able to hire them on an ad-hoc basis when times are very busy. For our model, however, we assumed that we hired all local employees, full-time. As the market matures, we may need to lay off some workers and scale the business back accordingly. We have not modeled in severance costs and do not currently know how easy it would be to quickly hire and lay off staff. Before deciding between full time and part-time hires, we would investigate this aspect more thoroughly. Water Bag Refills: The last main variable cost is the cost to refill the bags when a customer has a leak at the bottom, and Plan b needs to remove the water to get to the leak. Given that we will be doing the installation and taking special care to observe the bottom of the trench, we have estimated that only 20% of the bags will have leaks on the bottom. For these bags, however, we will remove the water and pay for a full refill of the bag.

27

The cost to refill the bag should probably be around 600 Rps ($14). However, we are in the process of finding more creative, less expensive ways to pump water out and return it back to the bag. For example, instead of paying an expensive tanker to come to the village, we might have an additional water bag where we pump the water from the damaged bag into our service bag, fix the damaged bag and then pump the water out of our service bag and back into the repaired bag. We also should be able to identify leaks in the monsoon season when the price for a water tanker is less than the usual 600 Rps. Fixed Costs: Most of the costs are variable. The largest fixed cost we have is the administrative overhead of the head office. Unlike other teams, we have assumed that we will only need three in the head office, CEO, CFO and COO. These three will be paid wages of $5,000 per year. This is greater than 5x what we would expect to pay the service people; however, it is probably on the lower side of what CEOs might expect to receive. We also have the overhead of our building rents. Costs for this were based on IDE�s current costs for their Indian rental agreements. Lastly, we had marketing costs. Initially, we view these marketing costs to be very low as we rely on IDE to make the majority of the dealer introductions for us. Over time, we would hope to build our dealer relationship and have higher �customer acquisition� costs. We did not assume that we needed significant capital costs. We are not buying any manufacturing equipment. Given our discussions with Sally Madsen, the machine tooling cost for stamped metal parts can be very low. Additionally, if we get volumes above 100,000 units, Indian manufacturers will assume the cost of tooling. By year 2, we are already expecting to need around 36K kits, which would imply individual patch units of 180K (each kit comes with 5 repair patches). We also considered buying a water tanker to hold water but realized that purchasing the water, when needed, was a much more viable option. Cash Flows Based on the above assumptions regarding revenues and costs, our initial rollout plan (which targets only IDE�s customer base and Maharashtra,) will require around $30K to start-up. We would expect to break-even in the third year and be able to payback all start-up losses by the fourth year. Financially, we would hope to generate an IRR of over 50% as our volumes grew. This return, however, would heavily depend on the ability to charge $5.00/bag sale and exercise tight control on costs. Our cash flows are very sensitive to the price of the warranty and the level of bags that develop a leak post-installation. If we keep the price at $5, we need the percentage of bags that break post-installation to go no higher than 53% or the business loses money annually. If the percent does go, e.g. as high as 75%, we would need to raise our price to $6.20 to cover the higher costs of servicing the higher number of bags.

28

Social Returns Summary Social Returns 2006 2007 2008 2009 2010 2011

Local Employees 16 156 293 392 336 338

Cumulative Farmers Helped by Plan b (000s) 5.0 66.4 178.8 291.3 312.0 333.6 Incremental Income for farmers 130.0$ 130.0$ 130.0$ 130.0$ 130.0$ 130.0$ Cumulative Income Generated for the Poor 655.2$ 8,634.6$ 23,241.5$ 37,869.3$ 40,559.3$ 43,361.8$

Social returns are largely created in three areas. First, we intend to employ 300-400 local employees to provide installation and repair services. These people would be well-trained and establish relationships with dealers and farmers that should enhance their productive capacity and possibly improve their ability to generate future commercial relationships with various parts of the supply chain. Second, we expect to generate approximately $43 million of additional income for farmers (333K) who would not have been able to have a working bag�either they would not have bought one or would have bought one that malfunctioned and prevented them from earning their expected $130 of additional income. Some of these farmers may get holes in the second year and hence would have seen an incremental boost to their income from our repair kit of only $90. However, other farmers may be able to extend the life of the bag due to the repair kit and could generate more than $130, providing further social benefits. Third, the enhanced income provides more economic security for the farmers and their family allowing them a better chance of escaping poverty. Farmers will not have to rely on exploitive money lenders or resort to suicide as they spiral into never-ending debt. Families will remain intact and the social benefits of higher income (better health protection, more schooling for children, etc.) can be realized more easily. Alternative Case Analysis: The Pessimistic and Upside Cases The most likely pessimistic case would be one where:

• Penetration of the addressable market is much slower than we expect, only reaching 1% rather than the 5.5% that we eventually expect

• The bag leaks much more often than expected. In the pessimistic case, we have assumed that 75% of bags leak post-installation rather than the 50% in the Base Case

• We are unable to support a warranty price of $5 and are forced to reduce prices to $4.50

• We are unable to manage the labor force well and each repair person can only service 1.5 visits rather than 2 visits per day

• The percent of holes on the bottom is higher than expected, 50% vs our expected 35% in the Base Case. This would also explain why we are unable to manage the sales force more efficiently. More of them would be dealing with holes on the bottom and the corresponding costs both in time and money of refills

29

The results of this disaster scenario are extreme. We are unprofitable every year and generate total losses of around $690K. To restore profitability, keeping everything else equal, we would need to raise the price of our warranty to approximately $9. Although this is a much higher price, we think that farmers might be willing to pay the higher price given that more of the bags would be breaking, providing us with a natural operational hedge. Granted, there would be less farmers willing to buy the bag in the first place (explaining the reduced market penetration). The fewer numbers of farmers might also improve the chance to deploy our service professionals more efficiently, which would lower our labor costs. If we could get our staff back up to two service visits a day, we could bring the price back down to $8.10 and still be profitable. One potential upside case would be where:

• The bag is working much better than expected (only breaking 30% of the time post-installation vs 50% in our Base Case)

• The higher quality bag leads to higher penetration rates (reaching 10% of the addressable market rather than the 5.5% in the Base Case)

• We would be able to charge a higher warranty price of $6 • We could manage our service professionals very efficiently and expect them to

service 2.5 jobs per day. In this scenario, the company would be profitable from the first year and generate $1.7 million of cash in seven years. Realistically, though, if events were progressing this smoothly with the bag, the price of the warranty likely would come down as farmers would feel less of a need to purchase it given the higher reliability of the bag. If the price were lowered back down to $5 (back to the Base Case level), the company would still be profitable but only generate $1.2 million in cash. Still, this is an enviable return for little investment. We believe there is also further upside if we were to expand into other geographies (other Indian states where IDE is operating), serve other NGOs, or serve other applications/devices that need mechanical repair solutions. We have not quantified these, however, in the financial model.

30

IDE Partnership To ensure a viable business, Plan b assumes an initial partnership with IDE India. However, there is a risk that IDE will be hesitant to increase the price of their bag by the additional $5 price point. Plan b�s ability to convince IDE of the benefits of this partnership is essential to the success repair business. Intellectual Property At the core of Plan b�s business is a mechanical patching technology that facilitates fast, durable, and low cost repair. Failure to obtain intellectual property rights in India for our product will leave the door open to direct imitation and an erosion of Plan b�s market advantage. Further, if a competitor happens upon a better patching solution that Plan b has not considered, our technology may become marginalized. Labor Costs With labor costs the single largest variable in our profitability model, large swings in the cost of labor will significantly impact Plan b�s business. We have performed extensive interviews with IDE India to pinpoint these labor costs, but variations are sure to occur. Failure to manage these labor costs is a key risk for Plan b. Purchased Refills It is assumed that 20% of the repairs will be to the underside of the bag and that Plan b will pay for tanker refills in these cases. Should this number be significantly higher, Plan b�s profitability could be affected.

Section

9 Critical Risks

31

Plan b plans to roll out their business model in two phases. Phase 1: At the outset, Plan b will partner with IDE India for a period of approximately 2 years. Together with IDE, Plan b will focus on the Maharashtra region of India and roll out our repair product and service plan alongside the 10,000L IDE bag. At this point in time, we are looking to raise $30,000 in upfront capital to fund our expected operational losses in the first few years. This phase will be focused on proving our model and solidify our reputation in the field. Since we are truly a service model, we realize that scaling our model is heavily dependent on the stability and strength of our communications systems and relationships with dealer networks. As such we want to ensure that we prove our model and work out any kinks in the system before attempting to scale and replicate rapidly. Phase 2: After the first two years working in collaboration with IDE, we plan to reassess our business model and consider different expansion options. At this time, we see two main expansion options: Continue with IDE and roll out to other geographies The advantages of rolling out to other geographies along with IDE include: the relationship and trust with IDE is already established; IDE can open the door for us to their other dealer networks before they get out of the market; it will be much easier to expand since they handle most of marketing. On the other hand, the main disadvantage is that geographic expansion may spread Plan b too thin especially because we are so labor and communications intensive. Stay within Maharashtra and focus more on expansion to other NGOs/products The advantages of choosing to remain within Maharashtra include building and leveraging our existing networks in Maharashtra and this would also force us to establish relationships with other NGOs or products and not trap us into being too dependent on IDE. However, there are disadvantages, including that we will not be able to take advantage of the synergies of rolling out a market with IDE and being the first mover in to the repair segment. At this point, we believe our focus should be on staying in Maharashtra and concentrating on solidifying our labor and dealer networks. In this way, we can work out the details of our model on a smaller geographic scale that we know well.

Section

10 Timeline

32

APPENDIX 1: MAP OF INDIA

Section

11 Appendices

33

APPENDIX 2: FULL FINANCIAL MODEL B ase C a se 2 006 200 7 20 08 2 009 2 010 201 1

M a rk et A ssu m p tion s(# in 0 00s)

P o pula tion in M aha ra shtra 100 ,000 1 02,50 0 105 ,063 107 ,689 11 0,38 1 1 13,1 41 G row th . 3% 3% 3% 3% 3 %

R ura l F am iles in M ah arashtra 1 2,000 12 ,3 00 12 ,608 12 ,923 1 3 ,24 6 13 ,5 77 A vg. F am ily S ize 5 5 5 5 5 5 % in A gricu ltu re /R ura l A re as 60% 60% 6 0% 60% 60% 60%

F am ilies w / D r ip and P oor 7,20 0 7 ,38 0 7 ,565 7 ,754 7 ,94 7 8 ,1 46 G row th 2% 2% 3% 2% 2 %% of Fa rm ers w ith U nre lia b le Y ear-ro und w ate r so urce 60% 60% 6 0% 60% 60% 60%D e ns ity o f P e ople p er S qK m 315 3 15 315 315 31 5 3 15

F arm e rs w ith B ag 5 66 227 388 41 7 4 48 % th at O w n B a g 0.07 % 0.9 0% 3 .00% 5 .00% 5.25 % 5.5 0%

N ew B ag B u yers 5 61 161 161 3 0 31 G row th 1 118% 16 2% 0% -82% 4 %

R epe at B a g B uyers (2 yr dura tion ) 0 0 5 61 16 1 1 61 G row th N /A N /A 11 18% 1 62% 0 %

T o tal N ew B ag P u rch ase s 5 61 166 222 19 0 1 92 G row th 1 118% 17 0% 34% -14% 1 %

ID E P e netra tion (u sed a s a ch eck to ga uge w ate r p ene tra tio n)N um be r o f F a rm e rs W h o B ou ght D rip K its 8 .0 9 .2 1 0 .6 12 .2 14 .0 16 .1

M arket P e netra t ion 0 .0% 0.0% 0.0% 0 .0% 0.0% 0.0%G row th in D rip K its -- 15% 1 5% 15% 15% 15%

C um ulative N um be r o f F a rm e rs w ith D rip K its 3 8 47 58 70 8 4 1 00

ID E C us to m ers w ho bou ght bag 4.0 0 .9 1 .1 1 .2 1 .4 1 .6 % of F arm ers w h o ge t B ag as w ell 50% 10% 1 0% 10% 10% 10%

R epa ir K it A ssu m ptions 2 006 200 7 20 08 2 009 2 010 201 1P u rch asers o f P lan B W a rran ty 5.0 61.4 115 .9 15 5.5 1 33.1 134.1

P ene tra tio n fo R e pair K its B oug ht 1 00% 100% 7 0% 70% 70% 70%

In s ta lla tio ns : S e rv ice V is its R e quired 5.0 61.4 115 .9 15 5.5 1 33.1 134.1Ins ta lla tions D on e by P la n B 1 00% 100% 10 0% 1 00% 1 00% 100 %

K its N eed ed a t Ins ta lla tion 0.4 4 .9 9 .3 12 .4 10 .6 10 .7 N u m be r o f H o le s tha t R epair K it F ixe s 5 .0 5 5 5 5 5N u m be r o f H o le s a t Ins ta lla tion 2 .0 2 2 2 2 2% of B a gs th at H ave H oles a t In s ta lla t ion 20% 20% 2 0% 20% 20% 20%

R epa irs : S ervice V is its R equired 2.5 30 .7 5 7 .9 77 .7 66 .5 67 .0 % of B a gs th at B rea k P os t Ins ta lla tio n 50% 50% 5 0% 50% 50% 50%

K its N eed ed for R epair V is its 2 .5 30 .7 5 7 .9 77 .7 66 .5 67 .0 % of B a gs th at B rea k P os t Ins ta lla tio n 50% 50% 5 0% 50% 50% 50%N u m be r o f H o le s P os t- In s ta lla tio n 5 .0 5 5 5 5 5

T o ta l S erv ice V is its 7 .6 92.1 173 .8 23 3.2 1 99.6 201.1

T o ta l R e pa ir K its N e eded 2.9 35.6 67 .2 9 0.2 77.2 77.8

R evenu es ($)R evenu es f ro m R e pair K its 25.2$ 322 .2$ 6 38.8$ 9 00.0$ 808.6$ 855 .6$

P urchase s o f P lan B W arranty 5 .0 6 1.4 115.9 155 .5 13 3.1 1 34.1P ric ing o f R epair K it 5 .00 5 .3 5 .5 5 .8 6 .1 6 .4 Inc rease in P r ic ing 5% 5% 5% 5% 5 %

O ther R evenue s -$ -$ -$ -$ -$ -$ V olum e from O ther P rodu c ts 0.0 - - - - -

0% 0% 0% 0% 0 %

T o tal R ev en u e 25.2$ 322 .2$ 6 38.8$ 9 00.0$ 808.6$ 855 .6$ G ro w th 117 9% 98% 41% -10 % 6%

34

V a riab le C os ts 2 006 200 7 20 08 2 009 2 010 201 1C ost o f R ep a ir K its 4 .0$ 51 .4$ 1 01.9$ 1 43.5$ 129.0$ 136 .5$

N u m be r o f R epa ir K its M an uf. 2 .9 35 .6 6 7 .2 90 .2 77 .2 77 .8 M anu f. C os ts / un it 1 .4 1 .4 1 .5 1 .6 1 .7 1 .8 Inc rease in P r ic ing 5% 5% 5% 5% 5 %

D ealer M arg in -$ -$ -$ -$ -$ -$ D e ale r C os ts / un it 0 .0 - - - - - Inc rease in P r ic ing 5% 5% 5% 5% 5 %

L abor C os ts 12.6$ 161 .1$ 3 19.4$ 4 50.0$ 404.3$ 427 .8$ To ta l S erv ice V is its 8 92 174 233 20 0 2 01 S erv ice V is its D on e pe r P erson p er Y ear 0.60 0 0 .60 0 0 .600 0 .600 0 .60 0 0 .6 00 S erv ice E m p loy ees R equ ired 1 3 1 53 290 389 33 3 3 35 A vg. A n nua l S a la ry fo r R e pairp erson 1.0$ 1 .1$ 1 .1$ 1 .2$ 1 .2$ 1 .3$ Inc rease in P r ic ing 5% 5% 5% 5% 5 %

D is tribu t ion C os ts 0 .0$ 0 .4$ 0 .7$ 1 .0$ 0 .9$ 1 .0$ N u m be r o f R epa ir K its M an uf. 2 .9 35 .6 6 7 .2 90 .2 77 .2 77 .8 S h ipp ing C os ts / U n it 0 .01 0.01 0 .01 0 .01 0 .0 1 0 .01 Inc rease in P r ic ing 5% 5% 5% 5% 5 %

W ate r R ef ills R e qu ired 6.2$ 79 .0$ 1 56.5$ 2 20.5$ 198.1$ 209 .6$ % of B a gs th at de ve lop h o les on bottom 35% 35% 3 5% 35% 35% 35%N u m be r o f R efills R equ ired 0.9 10 .7 2 0 .3 27 .2 23 .3 23 .5 P rice o f R efill from W ater T ank er (1 0,00 0L) 7.00$ 7$ 8$ 8$ 9$ 9$ Inc rease in P r ic ing 5% 5% 5% 5% 5 %

T o tal V ariab le C o sts 22.8$ 291 .8$ 5 78.6$ 8 15.1$ 732.3$ 774 .9$ G ro w th 117 9% 98% 41% -10 % 6%

F ixed C os tsM arketing 10.0$ 12 .1$ 1 4 .6$ 17 .7$ 21 .4$ 25 .9$

C u stom e r (D ea ler) acqu is ition co s ts 0.0 50 0.055 0.06 1 0.06 7 0.0 73 0 .081C o s t Inc rea ses 10% 1 0% 10% 10% 10%N u m be r o f D ea lers 200 .0 220 .0 2 42.0 2 66.2 292.8 322 .1 G row th 10% 1 0% 10% 10% 10%

B u ild ings 4$ 4$ 4$ 4$ 4$ 4$ O ffice - A nn ual R ent 3$ 3$ 3$ 3$ 3$ 3$ W a re hou se - A nn ual R e nt 1$ 1$ 1$ 1$ 1$ 1$

A d m in is tra tive 1 5$ 16$ 17$ 17$ 1 8$ 19$ N u m be r o f P eo p le in H O 3 3 3 3 3 3A vg. A n nua l S a la ry 5$ 5$ 6$ 6$ 6$ 6$ Inc rease in P r ic ing 5% 5% 5% 5% 5 %

T o tal F ix ed C os ts 29.2$ 32 .0$ 3 5 .4$ 39 .3$ 43 .9$ 49 .3$

In com e S ta tem e nt 2 006 200 7 20 08 2 009 2 010 201 1($ in 0 00s)

R evenu es 25.2$ 322 .2$ 6 38.8$ 9 00.0$ 808.6$ 855 .6$

V a riab le C os tsR e pair K it C os ts 4.0$ 51 .4$ 1 01.9$ 1 43.5$ 129.0$ 136 .5$ Lab or C o s ts 12.6 161 .1 3 19.4 4 50.0 404.3 427 .8 D is tr ib u tion C os ts 0.0 0 .4 0 .7 1 .0 0 .9 1 .0 W a ter R efills C os ts 6.2 79 .0 1 56.5 2 20.5 198.1 209 .6

T o ta l V ar ia b le C os ts 22.8$ 291 .8$ 5 78.6$ 8 15.1$ 732.3$ 774 .9$

G ross P ro fit 2 .4$ 30 .4$ 6 0 .3$ 84 .9$ 76 .3$ 80 .7$ M arg in 9 .4% 9.4% 9.4% 9 .4% 9.4% 9.4%

F ixed C os tsM arke tin g 10.0$ 12 .1$ 1 4 .6$ 17 .7$ 21 .4$ 25 .9$ R e nt 4 .2 4 .2 4 .2 4 .2 4 .2 4 .2 Incorpo ra tio n C os ts 0.3 - - - - - A dm in is tra tive (S a la ries for H Q ) 15.0 15 .8 1 6 .5 17 .4 18 .2 19 .1

T o ta l F ixed C o s ts 29.5$ 32 .0$ 3 5 .4$ 39 .3$ 43 .9$ 49 .3$

O p erating Incom e (27.1 )$ (1 .6)$ 2 4 .9$ 45 .6$ 32 .4$ 31 .5$ M arg in N /A N /A 3.9% 5 .1% 4.0% 3.7%

C ash FlowB e gin n ing C ash B a lance -$ (27 .1)$ (2 8 .7)$ (3 .8 )$ 41 .8$ 74 .2$ A n nual C ash Flow (27.1 )$ (1 .6)$ 2 4 .9$ 45 .6$ 32 .4$ 31 .5$ E n d in g C ash B a la nce (27.1 )$ (28 .7)$ (3 .8)$ 41 .8$ 74 .2$ 105 .7$

S o c ia l R etu rn s 2 006 200 7 20 08 2 009 2 010 201 1

L oca l E m ploye es 1 6 1 56 293 392 33 6 3 38

C um ula tive F arm ers H elped by P lan b (00 0s) 5 .0 66 .4 1 78.8 2 91.3 312.0 333 .6 In c re m enta l Incom e for fa rm ers 130.0$ 130 .0$ 1 30.0$ 1 30.0$ 130.0$ 130 .0$ C um ula tive In com e G enerated for the P oor 655.2$ 8 ,634 .6$ 2 3 ,24 1.5$ 37 ,8 69.3$ 40 ,559.3$ 43 ,361 .8$

C os t A na lys isV a riab le co s ts as % of T ota l C os ts 44% 9 0% 94% 95% 94 % 9 4%F ixed C os ts as % o f T o ta l C o s ts 56% 1 0% 6% 5% 6 % 6%

K it C os ts 18% 1 8% 18% 18% 18 % 1 8%L abor C os ts 55% 5 5% 55% 55% 55 % 5 5%W ate r R ef ill C o s ts 27% 2 7% 27% 27% 27 % 2 7%

35

APPENDIX 3: PHOTOGRAPHS FROM THE PROTOTYPING PROCESS

Many Team Brainstorming Sessions:

Testing the IDE Bag and the User Experience:

36

Prototyping, Prototyping and More Prototyping:

37

The Final Product:

38

APPENDIX 4: PLAN B MANAGEMENT TEAM BIOS

Andy Kelly, Civil and Environmental Engineering Hometown: Norman, Oklahoma Undergraduate Work: Colorado School of Mines Work Experience: Worked for three years as a Process Design Technology Engineer for Brown & Root Engineering. Focused most of my energy on B&R technology improving ethylene plant efficiency. More recently I worked for Nalco Chemical as a District Representative. At Nalco I worked on all kinds of water treatment facilities ranging from

Intel process treatment to bioremediation sites. Interests in order of devotion: Bouldering, music listening, music playing, and just recently furniture making

Erin Layburn, Graduate School of Business I am a 2nd year student at the Business School. Before coming to Stanford, I worked in the non-profit sector in DC, most recently as the program manager of the AEI-Brookings Joint Center. This past summer I interned at the World Bank/IFC in the Private Sector Development group and then spent the last few weeks of the summer in Guatemala conducting market research for Ignite Innovations. I studied environmental science and policy at Duke University and during my

junior year lived in Tanzania for 4 months. Since then I have been hooked on traveling - most recently have spent time in Ecuador, Peru, Guatemala and India and am always planning my next adventure! Besides traveling, other hobbies include doing anything outdoors, listening to live music and photography.

Colter Leys, Product Design Colter enjoys writing about himself in the third person and giving advice on things he knows nothing about. He is currently serving a third year in the Product Design Program where he enjoys designing wigits and gizmos (in that order). In prior lives, he was a carpenter, ski coach, architect and mechanical engineer; he has left it all behind to dive into the formidable frontier of IDE bag repair. He is assisted by a kick-ass wife, Annie and fat cat named Mendocino. Colter enjoys makin' chips in

the machine shop, carvin' big turns on his tele boards and sittin' in the backyard readin' the New Yorker.

Chad Sachs, Graduate School of Business After growing up in Texas and relinquishing my spurs and pony, I graduated from Georgetown University, majoring in International Economics. I spent a few years working in investment banking in New York and private equity in London. Before business school, I quit my job to travel around Africa, Asia and Australia. For the summer, I worked in India for IDE and in Vietnam for Ignite Innovations. I'm a big fan of traveling, painting hubcaps and eating spicy food that goes

well with Immodium.

39

APPENDIX 5: SELECTED SOURCES Interviews Discussion with Paul Polack, March 9, 2005. Discussion with Tapan Pattanayak, Head of Maharashtra region, IDE-India, Feb 17 and 25, 2005 Discussion with J. N. Ray, Chief Engineer at IDE-India, February 25, 2005. Discussion with Sally Madsen, Ignite Innovations, March 2005. Discussion with Ian Halpern, former plastics designer at Smart Products, March 2005 Documented Sources Jha, Raghbendra. �Rural Poverty in India: Structure, determinants and suggestions for policy

reform�, pg. 5, Macroeconomics for Developing Countries, Second edition, Routledge, London and New York, xiv+496pp. (http://unpan1.un.org/intradoc/groups/public/documents/APCITY/UNPAN013137.pdf)

Examples of Other Sources of Web-based Research:

• http://www.jwautomarine.co.uk/ • http://www.aimdiscount.com/ULiner.html • http://www.waterstructures.com/Hooks/water_storage.html • http://www.interstateproducts.com/potable_water_tanks.htm • http://www.duct-tape.com/ • http://www.masterbond.com/prodtype.html • http://www.shipstore.com/SS/HTML/ZOD/ZODZ6730.html • http://www.allinflatables.com/support/repairs.html • http://www.waterbed.com/waterbed-repair-kit.html • http://circlecitybicycles.com/tool/pkits.htm • http://www.snapfastener.com/repairkits.htm • http://www.trucktarps.com/patch_kit.html • http://www.wiggle.co.uk/?Category=puncture%20kits • http://www.rei.com/category/4500882.htm