Executive Summary

WaterWise™ is a partnership enterprise that will install Rainwater Harvesting Systems (RWH) in different resident and commercial structures for the customers and provide maintenance services of the installed systems. Rainwater Harvesting is the collection, conveyance and storage of rainwater for human use from rooftops and other surfaces by engineered techniques.

WaterWise™ will cater to two different markets: Dhaka city, the capital of Bangladesh and the arsenic-affected rural areas. The head-office of WaterWise™ will be situated in the center of the business hub in Dhaka, while the zonal offices will be in the North, South and South-East of Bangladesh. Increasing population, rampant pollution and a fast-depleting ground water table has render end 180,522 resident households in Dhaka City with an urgent necessity of an alternate water source.

The picture in rural Bangladesh is even more ominous, with an estimated 35 million people and one-third of privately owned shallow tube wells exposed to dangerous levels of arsenic. WaterWise™ will use the opportunities inherent in these very limitations as the RWH systems are ideal for this prevailing scenario. RWH is an affordable, environmentally sound option that is suitable for scattered settlements and provides high-quality water. RWH enhances control over a precious resource and reduces time and labor expended to procure water. The main objective of WaterWise™ is to employ renewable resources in order to provide a sustainable and cost-effective solution to the chronic water crisis which shows no sign of easing under the existing situation. By being the pioneers of this new industry and providing unprecedented customer service, WaterWise™ will be utilizing its market monopoly in the initial years. The firm will raise barriers to entry into the industry by approaching BSTI and WHO for certification of its product lines.

The Marketing Strategy

The marketing strategy of WaterWise™ will be to educate the customer about the benefits of rainwater and detriments of sole dependence on existing sources. This will be achieved by creating top-of-the-mind awareness through implementation of an integrated marketing communication that takes into account the distinct demographic and psychographic features of our target market. With growing awareness and a deepening water crisis in Dhaka City, the customer base of WaterWise™ is expected to grow at an increasing rate after the initial year of operation. The operational strategy of WaterWise™ will be to utilize indigenous materials for the RWH systems and employ a team of technical experts equipped with storage-volume determination techniques adapted to the unique climate of Bangladesh.

WaterWise™ will require a capital investment of BDT 10 million. BDT 6 million would be provided as capital and BDT 4 million will be borrowed from bank as a 5-year, 15% loan. The NPV of the project is $ 512,094 and IRR is 66%. Profitability ratios are as follows:

Ratio 2010 2011 2012 2013 2014Net Profit

Margin-2.23% 10.55% 22.11% 31.75% 39.89%

Return on Equity

-12.22% 46.79% 62.12% 58.89% 53.25%

Return on Assets

-5.73% 28.34% 48.12% 51.50% 49.60%

Water crisis is a global phenomenon. Therefore, the business model of WaterWise™ can be successfully replicated in any part of the world.

Business Idea

1.0 Rainwater Harvesting:

WaterWise™ provides a simple and innovative solution to a contemporary problem by exploiting an age-old phenomenon called Rainwater Harvesting (RWH). It is the collection, conveyance and storage of rainwater for human use, mainly from rooftops and other surfaces by engineered techniques. It is an important water source in areas with significant rainfall but without good quality fresh surface water or groundwater. WaterWise™ will install RWH systems in different structures for the customers and provide maintenance services of the installed systems.

The Need for Rainwater Harvesting:

Increasing population, combined with industrialization, urbanization, agricultural intensification and water-intensive lifestyles have exerted pressure on existing sources of water. Dhaka, the densely populated capital, is particularly vulnerable. The Dhaka Water and Sewerage Authority (DWASA) can only supply 1,500 million liters a day (mld) against a demand of 2,250 mld. The present sources of water supply to Dhaka city are no longer sustainable because of extreme dependence on ground water (83% of Dhaka’s total demand). Study reveals that Dhaka’s groundwater table has gone down by 35m in the past 11 years leaving the pumps being able to abstract water at only two-third of their capacity. The rest 17% of the water supply is derived from surface water, which is also highly polluted. The surface water treatment plants of DWASA cannot function properly as the pollution level in the rivers surrounding is so high that the water is beyond treatment.

While the water supply in Dhaka city is affected both in terms of quantity and quality, the main problem afflicting rural areas is the quality of the water. At present, the success achieved in hand

tube well based rural water supply is on the verge of collapse due to presence of arsenic in excess of acceptable levels in the shallow aquifers. Arsenic contamination has been found in 61 districts out of 64. It has been estimated that 27% of shallow tube wells in Bangladesh were contaminated with high levels of arsenic (above 50 µg/L).

From Problem to Opportunity:

WaterWise™ will use the opportunities inherent in these very limitations to its advantage by employing RWH as a method of conserving and improving water supply.

The capital city averages nearly 1,700 to 2,200 mm rainfall per year while the nationwide average is around 2,200 to 2800. Monsoon usually lasts from April to October. WaterWise™ intends to ease the pressure on surface water and groundwater usage in Dhaka city by promoting RWH in both domestic and commercial structures. With the current amount of rainfall, water equivalent to 15% of total demand can be captured, enough to meet the demand all year round. In rural areas, WaterWise™ will focus on the efficient utilization of rainwater for potable (drinking and cooking) purposes. With an average rainfall and using 1,100-gallon storage tanks, enough water could be collected in 12 hours to serve a family of 6 for 45 days. Through its operations, WaterWise™ will be taking a meaningful step towards significantly reducing the proportion of population without access to clean drinking water and achieve a very important Millennium Development Goal, to which Bangladesh is committed.

Goals:

The broad objectives of the business are: (1) To provide efficient rainwater harvesting solutions to households that complement the existing water supply (2) To provide round the year potable water supply for structures with poor or no water connection (3) To reduce pressure on groundwater and use renewable rainwater in energy-efficient and cost-effective way.

2.0 Market Potential

WaterWise™ will cater to two different markets: Dhaka city and the arsenic-affected rural areas.

Dhaka City:

Currently, the demand & supply gap in the capital is 750 mld, which is projected to increase by 100 mld each year. The population of Dhaka and surrounding areas is presently more than 10 million and by 2015 it is projected to be about more than 15 million. This increase in population will lead to an increase of 42% in demand. DWASA’s reliance on the conventional sources of water will not be able to meet this demand. At present 75% of Dhaka’s population is

under DWASA coverage. DWASA is supplying odiferous and contaminated water to 40% of the city. Water scarcity becomes a severe problem during summers when, except for some affluent areas, 90% of the city's residents face water shortages, 60% of whom face acute crisis. Taking these facts and the DWASA domestic customer base into account, there are about 180,522 resident households (Appendix-2E) in the capital with an urgent necessity of an alternate water source. The households in these areas have responded favorably to the concept of RWH (Appendix-3A). The 6000 commercial and 1660 industrial units in and around Dhaka are also potential markets (Appendix-2E).

RWH setups help meet demand in peak times and reduce consumer’s utility bills. Also, the water is free and the initial costs are offset by negligible recurrent costs within 2-3 years. Because RWH is a decentralized, environmentally sound solution, it can avoid many environmental problems often caused by the large-scale projects of DWASA using centralized approaches. RWH will also be a cost-effective option for the 1.5 million people who access DWASA water illegally at 170% higher costs and those who use DWASA’s vehicle delivered water supplies.

Rural Areas:

As a result of accelerated installation of shallow hand-pump tube-wells over the past decades as means of cheaper and convenient "safe" water supply, most rural people have become heavily dependent on groundwater. An estimated 57 million people drank water exceeding the WHO’s recommended arsenic level last year. Surveys have also shown that women, who are the principal users, are increasingly becoming aware of the threats posed by arsenic. Women living in the problem areas have to walk long distances to access water and attach great importance to ‘safety’, ‘convenience’, and ‘the ability to control one’s own water’. Of the 10 million tube-wells throughout rural Bangladesh, more than three-quarters are privately owned. These findings reflect a desire for households to have their own source of water.

Enter WaterWise™:

The RWH systems promoted by WaterWise™ are ideal for this prevailing scenario. The system is independent and suitable for scattered settlements. The operation of the system is easy and requires little maintenance. RWH systems are within the purchasing power of people living in rural communities. Average life expectancy of a RWH system is 10-15 years. About 50% of rural households have roof constructed from technically appropriate materials. In terms of physical- chemical parameters, collected rainwater tends to exhibit quality levels that are generally comparable to the WHO guideline values for drinking water.

Other advantages of rainwater include neutral pH, less corrosive nature and superior taste and cleansing properties. The water can also be preserved for 4 - 5 months (in the dry

season) without bacterial contamination so that the owner can get safe drinking water all-year round.

3.0 Competition

DWASA:

Currently no competition exists in terms of RWH in Bangladesh. The Dhaka WASA is the only agency responsible for delivering water in Dhaka city. But the authority is plagued with problems, such as corruption, poor distribution system, irregular supply, low production, poor quality of water, and high system loss.

Also, due to imbalanced water abstraction, DWASA is being forced to go deeper into the aquifers, which increases the cost of abstraction multifold. Moreover, increasing costs of fuel that run the generators and aging pipelines would only add to the cost, which will, in turn, increase the tariff. Furthermore, the cost of availing a new connection from DWASA is approximately Tk. 25,000 (for a 2 inch diameter pipe) which is even greater than the cost of establishing a small RWH setup.

Potential Competition:

The business idea, in itself, has a low barrier to entry. Realizing the potential threat of other investors, Water Wise plans to focus on value addition in terms of improved service and reliable technology. The following gives waterWise the advantage over potential competitors:

First-mover advantage of owning the concept of RWH in Bangladesh and being synonymous to the category itself.

Provide unprecedented customer service through quarterly quality check-up of RWH setup, water sample examination and capacity extension by the maintenance team.

Unique storage determination technology, experiential learning curve and top-notch industry experts and technicians would ensure technical advantage over competitors.

Another threat is that of DWASA itself, becoming a supplier of rainwater. However, the long term sustainability of such a project can be doubted due to bureaucratic hassles prevalent in the government body. Moreover, if the authority itself starts this venture, it will result in more publicity for the business idea. In such a case, better efficiency and sustainability of RWH can be ensured through private business initiatives rather than public sector enterprises.

The NGOs also work to promote rainwater harvesting. However, it is done in a much smaller scale and only in a few of the rural areas. Instead of posing threat of competition, these initiatives would pave way for easier entry in the market where the concept of rainwater harvesting has already been introduced.

4.0 Marketing Plan

Objective

The objective of the marketing plan is to:

Remove psychological barriers to using rainwater (if any) Educate the customer about the benefits of rainwater and detriments of sole dependence

on existing sources (DWASA, tube-well, ponds etc.) Create a top-of-mind positioning of the brand in consumer’s mind Establish the necessity of proper technology and regular maintenance to ensure safety

Segmentation

The target market will be segmented along these broad spectrums:

Geographic Segmentation: Rural and UrbanUrban consumers have more disposable income and are more responsive to promotion. Also, the crisis is more apparent in Dhaka. However, they are constrained by space and promotion is expensive. Rural customers are highly price sensitive, but the market size is several times larger. There are more open spaces and cost of labor and locally acquired materials are low.

Volumetric Segmentation: Domestic, Commercial and IndustrialDomestic users need RWH as a sustainable alternative source of potable water. Commercial offices can opt for RWH for sustainability, and as means to achieve socially responsible image. Industries could utilize their greater catchment surfaces for both potable and non-potable usage for direct use into production and for other purposes.

Product and Pricing Strategy

The RWH setups will be customized according to roof-size, customer affordability, average rainfall in the area and the use of water. For pricing, WaterWise™ uses cost-plus pricing strategy, where there is mark-up over the cost to determine the final price. Below is a summary of the products, the details of which is provided at Appendix-2C. The product names are in Bengali in order to increase relevance for the target market. The associated numbers represent the default capacity of each product (unless customized).

Product Price (Approximately)

Segments Capacity to Provide

Supeyo 5000 Urban Household Family of 3Jol 10000 Urban Household Family of 5Nirod 200000 Commercial setup Up to 150 peopleOrnob 1200000 Industrial setup Up to 1500 peopleTesta 4500 Rural Household Family of 3

Pipasha 5000 Rural Household Family of 5

Budget

Marketing budget is BDT 2 million (USD 29,412) for 1 year and BDT 1 million (USD 14,706) in every succeeding year. 65% of the budget will be spent for Below-the-Line (BTL) promotional activities and the rest for Above-the-Line (ATL) activities.

Educating the Customer

During the first 3 months, WaterWise™ will install sample RWH setups in both rural and urban areas. In the rural areas, WaterWise™ will setup RWH systems in 10 schools and 5 mosques (in 15 different villages). There is an acute need of potable and safe water in schools, and schoolchildren will spread the word-of-mouth of the technology and carry the idea to their homes. Setups at mosques will attract the attention of regular large congregations and Imams can help increase the acceptance of RWH. As a promotion, there will be a 50% discount for the first 20 RWH products (Supeyo) in Dhaka.

WaterWise will also circulate samples of DWASA water, along with leaflets containing the quality analysis of the sample and the possibilities of rainwater harvesting. This will reinforce the existing negative perception of the quality of DWASA water. PR Officers of WaterWise will also engage in personal selling by approaching commercial and industrial entities with the offers designed for such establishments and the cost-benefit analysis (Payback period calculated to be less than 4 years, Appendix-4)

Bringing in External Stakeholders

WaterWise™ will hold seminars & workshops and bring representatives of the government, NGO, donor agency and real estate developers together. The purpose would be to educate these stakeholders of the impact and benefit of RWH, and how a combined effort can bring an end to an imminent crisis.

5.0 Resource Requirements

The initial start-up capital for WaterWise™ will be BDT 11 million (USD 161,756). 60% of the investment would be provided by the entrepreneurs (equity) and the rest 40% will be obtained through a SME loan from Prime Bank Limited at 15% interest rate, which will be secured using postdated cheques. The loan will be paid back in 5 years.

6.0 Implementation Plan

Operational Layout

Start of Operation: March 2012

Head Office: Motijheel (Central Commercial Area), Dhaka (Warehouse in Tikatoli)

Zonal Offices: Bogra, Khulna, Noakhali (Addressing the north-west, south-west and south-east regions)

Agreements

Promotional Installments: WaterWise™ will contact potential customers for sample RWH setups as promotion. Different organization/institutions will be chosen for the promotion to represents different target customers.

Suppliers: WaterWise™ will make contracts with suppliers of plastic tanks, bricks, cements, iron bars, plastic/pvc pipes and other fittings. Zonal offices would acquire the products locally in order to achieve cost advantages. Sample filtration systems are also being evaluated, both from local producers and importers.

Business Process:

1. Collecting Orders: PR officers from the four offices would meet potential clients in their respective areas and explain the benefits of RWH (and refer to the initial sample setups) to collect orders. Using WaterWise Mass Curve Analysis™, storage volume and statistical dependability of the setup would be determined.

2. Bringing in Raw Materials and Construction: Based on the analysis, raw materials would be acquired from suppliers. Stock management would be based on JIT (just in time) principles.

3. Construction: Masons and helpers will be sent under the supervision of an engineer for the construction. Number and expertise of the workers would depend on the complexity of the setup.

4. Maintenance and After-Sales Service: Maintenance teams will visit the RWH systems at regular intervals and check for possible contamination, leakage etc. Telephone hotlines and websites would respond to customer queries and provide suggestions.

7.0 Risk Assessment

Technological Risk: Simple and matured technology ensures minimal threat.

Market Risk: Present levels of demand-supply gap poses no threat, but future increase in supply from competitors may lower prices.

Regulatory Risk: as WaterWise™ will operate as a complementary service to government services, it will receive significant help from the government.

Economic Risk: economic factors may increase the cost of goods sold.

Environmental Risk: the business may be affected by a dry period of time and lose potential customers.

Porter’s 5 Forces Model

Threat of Substitute Goods: Product differentiation and cost advantages over existing substitutes make the investment attractive.

Threat of Entry of New Competitors: Low barriers to entry and capital requirements pose a great threat. However, this will be offset by learning curve experiences and the brand equity derived from the first mover advantage.

Intensity of Competitive Rivalry: the low number and diversity of competitors together with the high industry growth rate reduces the intensity of competition.

Bargaining Power of Customers: Price insensitive customers with the unavailability of substitutes lose their bargaining power.

Bargaining Power of Suppliers: as most suppliers would be larger in size, will have the upper hand, however, the presence of many suppliers can help WaterWise™’s cause.

8.0 Contingency & Exit Plans

As investment requirements are low and the materials and equipment can be easily converted to cash, it will be very easy to recoup the amount invested, other than some sunk costs. If the business continues to earn losses, as a contingency, WaterWise™ can diversify into producing bottled drinking water. Since it has the expertise to collect and treat rainwater, it can start its own production using large scale RWH systems. It can also work with the government to artificially recharge the depleting groundwater of Dhaka city. The exit plan for WaterWise™ would be to sell to the business model and developed expertise to NGOs or donor agencies working in the development sector, who are interested in rainwater harvesting.

Appendix-1A (RWH Designs)

Rainwater Harvesting Systems

Surface Tanks

Fig-1 is a typical rainwater harvesting systems for a single household. Water collected in the roof is stored in the tank below, which is later retrieved using a tap from the bottom of the tank. This method uses gravity to collect and distribute rainwater and is highly cost- effective.

Fig-1: Surface tanks (diagram)

Sub-Surface Tanks

In case of space constraints and aesthetic issues, the storage tank can be made sub surface. This would require using hand-pumps or electric pumps to extract the water. Sub-surface tanks have the advantage of having larger storage capacity to store the water.

Figure 2: Sub-surface Tank Diagram Figure 3: Sub-surface tanks (actual)

Appendix-1B (Major Equipments in RWH System)

First-flush Diverters First-flush diverters avoid the foul water that comes during the first 5-10 minutes of rain. This water contains accumulated dirt from the rooftop, as well as suspended particles in the air. The method is very simple. A small tank (proportionate to the size of the roof) collects the first-flush, as soon as it fills up, the rubber ball seals the pipe and diverts further flow directly to the tank.

Gutters and Splash Guard V-shaped gutters at the end of the roof collect the rainfall and channel it to the pipes. A splash guard on top of the gutters would stop water from spilling over the gutter and waste in case of heavy rainfall.

Figure 4: Gutters and Splash Guard Figure 5: Water Filters (Ultra-violet)

Water Filters For drinking purposes, the water should be purified as an extra precaution. The users can boil the rainwater before drinking, or use filters to drink the water directly from the source. Our products come with three varieties of filters, sand, charcoal and ultra-violet, depending on cost and usage.

Appendix-1C (Operational Areas and Office Location)

Figure 7: Operational Areas in Bangladesh

Figure 6: Crisis Areas in Dhaka and Office Location

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