The Market and TDDA
GROWTH Any information supplied is not a representation and is supplied as part of the due diligence you are carrying out yourself
THE MARKET IN AUSTRALIA Through a number of reputable studies about the drug testing industry we can share the following information with you: In 2014 the drug testing industry was valued at $2.8 billion By 2019 the market is estimated to reach $3.5 billion – a 25% increase $23.7 billion is the estimated annual economic cost of alcohol and illicit drug misuse to Australian society $5.5 billion is the loss of national productive capacity in the workplace as a result of drug attributable death and sickness 62% of harmful users are in full time employment 25% of workplace accidents are caused by drugs & alcohol
THE MARKET Cont... In the existing market the harmful use of drugs and alcohol occurs at all levels within organisations and is more prevalent in some industries than others. Technology, liability and policy developments are driving growth in emerging industry segments that we have not previously seen. Clients from all sectors including top 100 companies, banks, retailers, finance industries and schools are all reviewing their drug and alcohol policies and drug education of management, contractors and employees. They are also increasing all forms of drug testing. Pre-employment drug testing is another area we are seeing growth. Many recruitment companies are making a drug test mandatory as part of the recruitment process. More employers are wanting to know if a potential employee could become a risk to their business and their existing employees.
CHOOSING A TERRITORY When choosing a TDDA territory a potential Franchisee should consider a number of factors: • • • • • • •
Where you live and the proximity to the territory Local knowledge of the territory The target market within the territory Local networks/contacts within a territory Knowledge of potential future growth within the territory Neighbouring territories for possible future purchase (multi unit ownership) The units of demand measure vs. the amount of businesses within each territory
TDDA will supply you with territory maps and units of demand measures.
TRAINING When looking at the initial period of a new business, much of the first 3 - 6 months will be taken up in training and developing business relationships. This is implemented through the 100-day training programme and has been developed to provide TDDA franchisees with all the tools necessary to run a successful franchise. The 100-day training commences with a 4 week residential induction course in New Zealand. This assists you in all facets of your business and includes: • • • • •
Public Speaking Business Development Collectors Course (AS/NZS 4308:2008 & AS 4760-2006) TDDA operating systems IT and Account Management
Training continues in your territory when you return home and support is tailored to each Franchisee.
YOUR FIRST 12 MONTHS Investing in TDDA is a full-time commitment and a big part of the business success is the hours a Franchisee invests. Business development plays a vital role in the growth of your business. Several factors to take into consideration are: Testing consumables are supplied as part of the “start up kit” - sufficient to invoice circa $35k worth of income On a managed case by case basis, Franchisees have the ability to provide testing services in unpopulated territories – creating more income No mandatory requirement for a physical office – assisting with cash flow and reducing overheads
YOUR FIRST 12 MONTHS Cont.. Following are graphs from 2 new Franchisees in Year 1 showing their testing numbers and income. You will note the comparable difference in the first three months. As shown Franchisees are experiencing growth earlier than 12 months ago. We believe this trend will continue and incoming Franchisees will see accelerated growth due to: Business development and public speaking provided in the induction course National Business Development Manager assists you with growing national clients in your territory National Business Development Manager assists you in your territory in your first few weeks by attending meetings and presentations A growing number of national clients National clients in your territory that may have previously been serviced by another Franchisee Growth in hair testing. Pre-employment, court orders, custody etc are all driving growth
FRANCHISEE YEAR 1 COMPLETED INDUCTION COURSE NOV 2014 Franchisee completed Induction–Course November 2014 UNITS OF DEMAND CIRCA 60,000 Units of Demand - Circa 60,000 $25,000 25000.00
20000.00 $20,000 D & A Policies
$15,000 15000.00 Drug & Alcohol Testing
$10,000 10000.00
Training
Nov-15
Oct-15
Sep-15
Aug-15
Jul-15
Jun-15
May-15
Apr-15
Mar-15
Feb-15
Jan-15
Dec-14
$0 0.00
Nov-14
5000.00 $5,000
Franchisee completed Induction Course June 2015 Units of Demand - Circa 64,000
5000.00
Nov-15
Oct-15
Sep-15
Aug-15
Jul-15
Jun-15
May-15
Apr-15
Mar-15
Feb-15
Jan-15
Dec-14
Nov-14
0.00
FRANCHISEE YEAR 1 Franchisee completed Induction Course June 20152015 COMPLETED INDUCTION COURSE JUNE Units of Demand - Circa 64,000 UNITS OF DEMAND – CIRCA 64,000 14000.00 $14,000 12000.00 $12,000 10000.00 $10,000
$8,000 8000.00
D & A Policies
$6,000 6000.00
Drug & Alcohol Testing
$4,000 4000.00
Training
Apr-16
Mar-16
Feb-16
Jan-16
Dec-15
Nov-15
Oct-15
Sep-15
Aug-15
$0 0.00
Jul-15
$2,000 2000.00
THE FOLLOWING FRANCHISEE
AND CLIENT STORIES WILL
PROVIDE YOU WITH A
GOOD UNDERSTANDING OF THE TDDA BUSINESS
FRANCHISEE A KPI BENCHMARK CIRCA 76,000 UNITS OF DEMAND MONTHLY AVERAGE REVENUE Sales $35,030 Cost of Goods Gross Profit
21% 79%
Expenses as % of GP Royalty/Marketing 10% Staff wages 19% Rent 4% Other expenses 30% EBIT 32%
4200 average number tests per year
FRANCHISEE B OWNING A FRANCHISE VERSUS BEING A EMPLOYEE We understand that financials and return on investment are important to you when making a decision on investing in a Franchise. There are many advantages of being self employed and growing an asset versus being an employee. A great story we can share is what one of our Franchisees at Year 7 recently accomplished. • $1.1 Million + annual turnover for previous two years • 24% net profit and at the same time adding value to their business asset • 23% growth in the business for the last 12 months • Recently became a multi-unit owner purchasing their second territory • The initial investment for the Franchise was $50k
FRANCHISEE C A FRANCHISE TERRITORY & UNITS OF DEMAND (UOD) A new Franchisee purchases an existing territory with UOD circa 40,000 per annum in December 2006
Geographical Info • Large geographical area (4 hours from one side to other) • Difficult access to many sites with undulating terrain and poor road conditions • Original Franchisee was not performing well (lack of work ethic and not putting in the effort). Territory surrendered and Franchisor took over the management • Oct 2012 an employee of the Franchise saw the potential and purchased the Franchise • They focused on establishing strong relationships with clients • The community has embraced the TDDA brand and recognises its contribution
Turnover performance • 2012 circa $270k • 2013 circa $471k • 2014 circa $561k Record Month in Jan 2015 with 467 tests (equates to circa $50,000 income)
FRANCHISEE D SPORTS STAR TO SUCCESSFUL BUSINESS OWNER
32% increase in testing numbers in one year • • • •
Retired professional sportsman transitions into a business owner Focuses on working in his community Attends local meetings, provides education and talks at events at no charge Delivers a great service to clients and believes in sticking to the basics ie. Service delivery Relationships Going the extra mile Extremely knowledgeable and educated about latest developments
FRANCHISEE E BUILDING YOUR BUSINESS + ASSET Another facet of growing your business is building an asset to realise the gain when the business has been established and sold. Building a business gives you not only income but financial freedom. It gives you options and choices. You may choose to employ a manager to run the business and enjoy the passive income You have an appreciating asset with great cash flow that will set you up for a very comfortable retirement The greatest determinant on the success of the business is the actual Franchisee and their work ethic. Examples of this can be seen when an average performing territory is sold to new owners. Recent sales of established TDDA Franchise territories have been based on a multiplier of between 3 - 4 of EBIT. This multiplier is what is used to calculate the value of the business as an asset when going to the market for sale. We expect the multiple to grow as the business expands and less territories are available. The average net profit in the third year of operation for recent TDDA Franchisees is circa $180,000 Based on EBIT multiplier of 4, this values the business at the end of Year 3 at circa $720,000
Would you have an asset valued at $720,000 if you stayed in salaried employment?
TDDA CLIENT SUCCESS STORY • • • • • • • • •
Testing numbers increased The number of non- negatives decreased from 12% - 3% Employee productivity increased Stand down time reduced Overheads reduced by 1/3 including recruitment costs and training expenses Company profit margins increased Improved morale and culture in the workplace providing a happier environment for all employees The client values TDDA as a strategic partner and as an important part of their success Creating a positive impact and a safer community
THERE’S A LOT OF MONEY IN DRUGS MAKE SURE YOU CONTROL YOUR TERRITORY
www.tdda.com
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