Académique Documents
Professionnel Documents
Culture Documents
Calon Lochridge
Trevor Morgan
Josh Millheim
Jaron Beckwith
Background
ageLOC Spas
ageLOC Resorts
$2,132
$1,158
2007
$1,248
2008
$1,314
2009
$1,518
2010
$1,720
2011
2012
2013
The MLM structure that has given Nu Skin so much success has lead to a
negative perception by others
2012
2013
2014
$145.00
2015
2011
$65.00
$45.00
$25.00
$5.00
-$15.00
To improve public perception and generate new streams of revenue, Nu Skin should
develop ageLOC Spas, ageLOC Resorts, and a Tiered Membership System
ageLOC Spas
ageLOC Resorts
Tiered Membership System
Capture maximum market share of the Health Spa Industry and improve brand perception by
investing in traditional spas and health spa resorts
Market Share
Massage Envy
10%
Country Ranch
3%
Woodhouse
Spa
Golden 2%
Door
1%
Other
84%
Country Ranch
3%
Woodhouse Spa
2%
Golden Door
1%
Nu Skin
5%
Other
79%
Nu Skin can save on purchase costs over competitors, this will incentivize Distributors to
invest in the ageLOC Spa franchise.
8.9%
7.2%
28.8%
73.5%
23.4%
7.2%
63.0%
3.5%
52.5%
Depreciation
42.0%
Profit
31.5%
Purchases
43.5%
43.5%
Wages
Other
21.0%
10.5%
12.9%
12.9%
Industry
Nuskin
Nu Skin
0.0%
The ageLOC Spa Entrance Strategy has Nu Skin entering spas in six locations, each with
high Asian population to build initial market share.
ageLOC Spa
ageLOC Resort will be a larger scale inclusive resort that will improve brand image, facilitate
sign-up of distributors, and increase revenue.
ageLOC Resort will capture an additional 3.3% market share to complete five-year goal is to
capture 5% market share of the $15.4 billion health spa industry.
ageLOC Spa will have positive discounted cash flows (DCF) for owners ($92,388,138) and Nu
Skin ($223,148,008).
Franchise fees for resorts will be lowered to 20% to adjust for investment and financing.
6.0%
5.0%
4.0%
S PA A N D R E S O RT R E V E N U E
$200,000,000
3.3%
3.0%
5%
$150,000,000
2.0%
1.0%
$100,000,000
1.7%
$50,000,000
0.0%
Spa
Resort
Total
$2014
2015
2016
2017
2018
The ageLOC Resort Entrance Strategy has Nu Skin simultaneously building two resort
locations, one in Los Angels and one in Miami
ageLOC Resort
ageLOC Spa
Level 3 Training
Level 5 Scanner
Breakdown of costs, revenue and profits at five years of implementation for the tiered
membership program.
Revenues
Four year projection
$65 million by 2018
Margins
Roughly 77%
Profits
Low fixed costs, high margins
Other Benefits
Distributor buy-in
Indirect revenue
$60,000,000
$50,000,000
$45,634,620
$40,000,000
$30,000,000
$27,964,680
$20,000,000
$13,272,000
$10,000,000
$2015
2016
2017
2018
Note: We estimate that the effect of this plan on distributor success will cause an increase in Nu
Skins overall revenue in addition to the revenue brought in by membership fees.
Our timeline shows five years of development for Nu Skin, moving from simple implementation
of the tiered membership system into worldwide expansion of the spa/resort program.
Year 1
Years 1-2
Years 3-4
Years 5+
During this time we will identify Lapis/Ruby distributors who would make a good fit as a spa/resort franchiser
We will also complete research on what services should be offered, the most attractive spa packages, etc.
During these years we will build the six spas and two resorts,
tracking them closely to examine their performance.
The combination of our different programs has Nu Skin conservatively at 233.21 mm by 2018, primarily
in the US market. This does not take into account added revenue due to more effective distributors.
$600.00
$175.37
$500.00
$127.16
$400.00
$13.27
$300.00
$298.22
$297.06
2014
2015
$321.24
$344.72
$367.06
$200.00
$100.00
$Projected Revenue
2016
Spa/Resort Revenue
2017
2018
*Note: Nu Skin revenue projections done with a linear percent growth model .Top number represents the
total revenue increase from both the ageLOC Spas/Resorts and the tiered membership plan
Appendix
Sources
The combination of our different programs has Nu Skin conservatively 233.21 mm by 2018, primarily in
the US market. This does not take into account added revenue due to more effective distributors
$3,500.00
$175.37
$127.16
$3,000.00
$13.27
$2,500.00
$2,560.00
$2,550.00
2014
2015
$3,150.90
$2,959.15
$2,757.57
$2,000.00
$1,500.00
$1,000.00
$500.00
$-
Projected Revenue
2016
Spa/Resort Revenue
2017
2018
*Note: Nu Skin revenue projections done with a linear percent growth model .Top number represents the total
revenue increase from both the ageLOC Spas/Resorts and the tiered membership plan
60%
y = -0.0083x + 0.1561
50%
40%
30%
20%
10%
0%
0
-10%
-20%
-30%
10
An exhibit of the calculations that went into the costs and revenues associated with the spa and
resort structure, compared to benchmark.
ageLOC Spa
ageLOC Resort
Revenue
$ 1,463,000,000
$ 261,800,000
Franchise %
$ 76,230,000.0
117,040,000
91,630,000
Cost (CoGS)
508,200,000
$ 17,837,820.0
Wages
636,405,000
$ 113,883,000
$ 221,067,000
Rent
105,336,000
$ 18,849,600
36,590,400
Other
188,727,000
$ 33,772,200
65,557,800
Net Profit
117,040,000
76,230,000
167,860,000
Total
91,630,000
Assumptions regarding revenue growth over five year period and Nu Skin cost percentages
compared to industry data
2015
2016
2017
2018
Spas
Resort
Spa Rev
$ 61,086,667
$ 91,630,000
$ 91,630,000
Resort Rev
$ 38,115,000
$ 38,115,000
$ 76,230,000
Total
$ 99,201,667
$ 129,745,000
$ 167,860,000
Category
Profit
Wages
Purchases
Depreciation
Marketing
Rent & Utilities
Other
Total
Nuskin
28.8%
43.5%
3.5%
2.1%
2.0%
7.2%
12.9%
100.0%
2015
1,309,470
$12,500
$125,000.00
6,250.00
$125,000.00
3,750.00
$562,500.00
2,500
$187,500.00
530
$106,000.00
2016
1,349,796
$26,339
$263,390.00
13,170.00
$263,400.00
7,902.00
$1,185,300.00
5,268
$395,100.00
1,116
$223,200.00
2107
1,429,608
$42,985
$429,850.00
21,493.00
$429,860.00
12,896.00
$1,934,400.00
8,597
$644,775.00
1,820
$364,000.00
2018
1,488,734
$61,555
$615,550.00
30,778.00
$615,560.00
18,467.00
$2,770,050.00
12,311
$923,325.00
2,607
$521,400.00
Total Rev/Month
1,106,000
2,330,390
3,802,885
5,445,885
Total Distributors
Total Rev/Year
1,335,000
13,272,000
1,403,591
27,964,680
1,517,399
45,634,620
1,614,452
65,350,620
0
1
2
3
4
Subscribers
Revenue
Subscribers
Revenue
Subscribers
Revenue
Subscribers
Revenue
Subscribers
Revenue
Subscribers
Revenue
2014
1,335,000
$$0
$0
$$0
$-
120,000
Year
2011
41,816
2012
51,790
2013
102,117
2014
102,117
2015
102,117
2016
107,584
2017
117,558
2018
127,532
y = 30151x - 6E+07
R = 0.8701
100,000
80,000
60,000
40,000
20,000
0
2010.5
2011
2011.5
2012
2012.5
2013
2013.5
Level 2
Level 3
Level 4
30 consultants with expertise in specific regions. Each with salary of $100,000. $3,000,000/15,000 distributors=$200 cost
Distributor pays 1,800. (1800-200-180-25)/1800= .78 margin
Level 5
Subscribers in
2018
Perks
No support
Brochures/business cards
Internet Marketing
Training
Lead Generation
Consultation
Scanner
1,488,734
61,555
30,778.00
18,467.00
12,311
2,607
Cost
-- $
10.00
20.00
75.00
150.00
200.00
Total Rev.
Net Profit
Profit Margin
Net Profit
-$7,386,600.00
$7,386,720.00
$33,240,600.00
$11,079,900.00
$6,256,800.00
0.79
0.15
0.77
0.78
0.73
$5,835,414.00
$1,108,008.00
$25,595,262.00
$8,642,322.00
$4,567,464.00
$65,350,620
$45,748,470.00
Note: We estimate that the effect of this plan on distributor success will cause an increase in
Nu Skins overall revenue in addition to the revenue brought in by membership fees.
DCF Analysis of cash flows from the ageLOC resort for Nu Skin and for the owner of the resort
assuming a WACC of 7.65%.
Year 1
Year 2
Year 3
Year 4
Year 5
Cash Flow
$ 51,125,881 $ 53,324,293 $55,617,238 $58,008,779 $60,503,157
Present Value
$47,493,499
$46,016,316 $44,585,077 $43,198,354 $41,854,762
Total
$223,148,008
Year 1
Year 2
Year 3
Year 4
Year 5
9,035,796 $ 25,468,206 $26,563,338 $27,705,562 $28,896,901
$8,393,822
$21,977,844 $21,294,270 $20,631,957 $19,990,245
$92,288,138
66,855,922
Depreciation
(Capex)
(Change NWC)
Cash Flow
(17,837,820)
$
49,018,102
7,901,722
Depreciation
16,516,500
(Capex)
(Change NWC)
(14,845,276)
$
(537,150)
9,035,796
Initial Outlay
(15,382,426)
Analysis of land, building and start up costs associated with ageLOC Resort to reach an
estimated initial outlay.
Land Analysis (LA):
Acres
Cost
58.25
$ 319,000
10.41
$ 139,000
35.91
$ 1,250,000
$
463
10.29
$ 950,000
420
20.64
$ 288,000
7.35
$ 825,000
75
8.23
$ 100,000
6.95
$ 1,389,990
31,500
4.27
$ 195,000
10,500
16.79
$ 795,000
Average
10
Median
5
Land Analysis (Miami):
3
Acres
Cost
$
3,200
9.6 $ 225,000
2.00
$ 395,000
$
8,000
10.13
$22,000,000
$
50,000
9.68
$ 8,000,000
$
2.5
1.22
$ 4,000,000
13.42
$ 395,000
9.02
$ 850,000
10.00
$ 999,999
15.68
$ 1,750,000
(14,595,000.00)
Average
Median
(250,276.27)
Per Acre
$ 23,437.50
$ 197,500.00
$ 2,171,767.03
$ 826,446.28
$ 3,278,688.52
$ 29,433.68
$ 94,235.03
$ 99,999.90
$ 111,607.14
$ 759,235.01
$ 154,553.57
(222,000)
$ (315,150.00)
$(15,382,426.27)
$ 390,023.19
$ 92,322.64
$ 100,110.51
Assumptions
Initial Investment Costs
Building
47%
50%
1%
1%
1%
Land
Pool/Hot
Tub/Sauna
Spa Equiptment
Resort Costs:
Cost per Sq/Ft
Avg. Room Size (sq/ft.)
Number of Rooms
Square Footage (Rooms and
Lobby)
Square Footage (Spa)
Number of Saunas
Number of Hot Tubs
Number of Pools
Cost Per Sauna
Cost Per Hot Tub
Cost Per Pool
Resort Acreage
Investments:
Building
Land
Pool/Hot Tub/Sauna
Spa Equipment
Total Investment
Per Acre
$
5,476.39
$ 13,352.55
$ 34,809.25
$ 92,322.64
$ 13,953.49
$ 112,244.90
$ 12,150.67
$ 199,998.56
$ 45,667.45
$ 47,349.61
$ 57,732.55
$ 45,667.45
Computation of Nu Skins Weighted Average Cost of Capital (WACC) using market data.
Cost of Equity
Cost of Debt
WACC
7.65%
1.68
0.53RFF
2.35%
ERP
7.89%
Amortization schedule of payments received from ageLOC spa owners, assuming that Nu Skin
offers franchising at a rate equal to WACC.
Amortization Schedule
Nu Skin can make
an addtional $5
million through
financing.
This schedule
assumes the
issuance of a 15
year note with
interest due
annually.
Period
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Total
Present Value
Interest
Payment
Cash PMT
$1,758,700
$1,758,700
$1,758,700
$1,758,700
$1,758,700
$1,758,700
$1,758,700
$1,758,700
$1,758,700
$1,758,700
$1,758,700
$1,758,700
$1,758,700
$1,758,700
$1,758,700
7.65%
$1,758,700
Interest
1,176,473.40
1,131,943.71
1,084,008.31
1,032,406.74
976,858.60
917,062.04
852,692.14
783,399.13
708,806.47
628,508.84
542,069.92
449,020.00
348,853.48
241,026.05
124,951.80
Income
582,227.06
626,756.75
674,692.15
726,293.72
781,841.86
841,638.42
906,008.32
975,301.33
1,049,893.99
1,130,191.62
1,216,630.54
1,309,680.46
1,409,846.98
1,517,674.41
1,633,748.66
$15,382,426.27
$5,092,433.36
Principle
15,382,426
14,800,199.21
14,173,442.46
13,498,750.31
12,772,456.59
11,990,614.73
11,148,976.31
10,242,968.00
9,267,666.66
8,217,772.67
7,087,581.06
5,870,950.51
4,561,270.06
3,151,423.07
1,633,748.66
(0.00)