Nolan is also hoping to raise at least $3 million by December through a public offering of less than 30% of Landmark's stock. With that cushion, he would be able to speed his growth, opening more than eight branches a year after this year.
But Nolan isn't counting on that. "This company could finance its own growth," he says. "If I can't raise the money, we'll just grow slower. It's tough.'
Christopher Nolan isn't just introducing a new product in a proven market; he's trying to build a market where, as Hughes puts it, "there has been a lot of crawling, stumbling, and falling.'
Ultimately, it may turn out that consumers are dubious about the guidance they get from attorneys whose profits depend on dispensing wisdom fast. Companies, having watched group health premiums rise an average of 40% last year, may not be in the mood to add legal plans as a benefit for their employees.
But assuming there is the strong market Nolan sees, Landmark is most vulnerable in its distribution system: the insurance brokers. "I'm betting very, very heavily on brokerage community acceptance," Nolan admits. "I am putting all my eggs in one basket." There are several potential holes in that basket.
One is that the brokers might not push the plans because they require too much explanation. New insurance-type products, as opposed to marketing twists on familiar products, take forever to catch on. Brokers might decide they'd rather spend the time selling a higher-commission product like group health insurance.
If the brokers don't push fast enough, the lawyers' interest may wane. "Where are all those clients?" has been the parting shot of many a legal plan lawyer.
Finally, there is the one risk that any small company in a new industry must anticipate. Most big insurance companies have avoided writing legal plans because it is hard to assess the risk. Watching Landmark may give them some ideas. Big ideas.
By that time Nolan hopes that Landmark will be the perfect acquisition target, though it's hard to imagine him returning to work for somebody else. He does not, after all, speak fondly of his former employers.
"I was as big a sucker as anyone else," he says. "But those companies didn't know how to do it. There's big demand for this product, and I've got the formula that works.'
Research assistance was provided by Leslie Brokaw.
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EXECUTIVE SUMMARY
The Company: Landmark Legal Plans Inc., Denver
Concept: Legal plans for businesses and individuals offering specified legal services and a discount retainer for an annual fee
Projections: Pretax net of $58,700 in 1989. In 1993, sales of $47.8 million, with more than $11 million in profits (about 24% pretax net)
Hurdles: Questionable demand; getting insurance brokers to sell plans; delivering customer volume to lawyers quickly enough to keep them interested in providing services
FINANCIALS
Landmark Legal Plans Inc. projected annual operating statements
Fiscal year 1989 Fiscal year 1993Sales (and % of sales) (and % of sales)
Business plans $702,600 (40%) $19,131,400 (40%)
Individual plans 1,053,800 (60%) 28,697,200 (60%)
Total sales 1,756,400 47,828,600
Cost of Sales
IMS commissions 737,600 (42%) 15,010,800 (31.4%)(brokers)
Access attorneys 316,200 (18%) 10,588,800 (22.1%)
NIA commission 210,800 (12%) 4,782,900 (10%) (administration)
Total cost of sales 1,264,600 (72%) 30,382,500 (63.5%)
Gross Profit 491,800 (28%) 17,446,100 (36.5%)
Operating Expenses
Corporate salaries/ 210,800 (12%) 3,947,200 (8.3%)bonuses
Printing and advertising 53,200 (3%) 837,900 (1.8%)
Seminars and training 16,900 (1%) 267,000 (0.6%)
Legal fees 20,300 (1.2%) 75,600 (0.2%)
Miscellaneous 14,500 (0.8%) 23,700 (0.05%)marketing
Telephone 7,500 (0.4%) 114,000 (0.2%)
Postage 10,500 (0.6%) 166,300 (0.3%)
Rent 22,200 (1.3%) 123,200 (0.3%)
Equipment 44,700 (2.5%) 250,200 (0.5%)
Supplies 5,300 (0.3%) 83,200 (0.2%)
Miscellaneous 27,200 (1.5%) 142,900 (0.3%)
Total operating 433,100 (24.7%) 6,031,200 (12.6%)expenses
Net Income 58,700 (3.3%) 11,414,900 (23.9%) before Taxes
THE FOUNDER
Sometime in 1983, as Christopher Nolan was giving a seminar on real estate, a man emerged from the crowd and asked him, "How much are you spending on an attorney?" Too much, replied Nolan -- who, as a real-estate investor, was plunking down as much as $6,000 a month for a lawyer to handle contractor's agreements, mortgages, and so on. That's when the man told him about prepaid legal plans. Nolan bought one. He found it actually cut his legal bills in half. "I became intrigued," he says.
Once Nolan becomes intrigued, he generally follows up. Not long after graduating from Northern Michigan University in 1973, Nolan entered the securities industry, where he helped wealthy clients pad their portfolios with tax shelters. What intrigued him then, he says, was that most of them had made money, and buckets of it, in real estate.
Off he went to a real-estate seminar given by Albert J. Lowry, a then-popular (now bankrupt) lecturer on the subject. Not only did Nolan take the plunge into real estate -- he claims he made about $160,000 gross his first year -- but he eventually accepted Lowry's invitation to tour nearly 160 cities, telling 1.5 million people about how Lowry's system had worked for him.
But Nolan, now 37, claims none of his previous jobs fully prepared him for the challenge of starting Landmark Legal Plans Inc. Well, maybe one. As a kid, he led groups of people on fishing and hunting trips through the wilderness of northern Ontario. "It was great for honing people skills," he says. "You can drop me in the middle of anywhere, and I'll do just fine. So Landmark doesn't scare me all that much.'
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