Financial Assumptions Documentation
Executive Summary
Local Care Systems Inc DBA Local LifeCare operates a Life Care Platform that achieves $165.6M ARR by Year 5 through zero-CAC distribution partnerships and software-like economics.
Key Model Drivers
- Distribution: Zero customer acquisition cost through Employer Group and DPC partners
- Pricing: $0.65 PEPM (Employer Group), $0.65-$1.00 PMPM (DPC), $165/month (Premium)
- Scale: 150,000 → 6,000,000 lives over 5 years
- Margins: ~87% in Year 1, ~90% thereafter through automation
- Support: 1:1,500 → 1:2,500 member-to-coordinator ratio progression
- Capital: $1.6M seed provides 18-month runway to profitability
Channel Revenue Assumptions
Track 1: Employer Group Distribution (Base Layer)
Employer Groups provide zero-CAC access to employer populations
| Metric | Assumption | Rationale |
|---|---|---|
| Pricing | $0.65 PEPM flat | Below benefit administration noise level |
| Year 1 Lives | 100,000 | 1-2 mid-size Employer Groups |
| Year 5 Lives | 5,000,000 | 50+ Employer Group partnerships |
| Growth Rate | 5x annually Y1-Y3, 1.67x Y3-Y5 | Network effects accelerate adoption |
| Revenue Share | 10-15% to Employer Group | Standard channel margin |
| Contract Size | $50K-$200K annually | Per Employer Group based on covered lives |
Track 2: DPC Distribution (Engagement Layer)
Direct Primary Care clinics integrate platform into membership
| Metric | Assumption | Rationale |
|---|---|---|
| Pricing | $0.65-$1.00 PMPM | Volume-based pricing |
| Year 1 Lives | 50,000 | 10-20 clinics |
| Year 5 Lives | 1,000,000 | 500+ clinic network |
| Growth Rate | 3x annually | Steady clinic expansion |
| Integration Time | Seamless | No clinical systems required |
| Clinic Size | 200-2,000 lives average | Mix of solo and group practices |
Track 3: Premium Tier (Revenue Multiplier)
Enhanced support for highly engaged members
| Metric | Assumption | Rationale |
|---|---|---|
| Pricing | $165/month ($1,980/year) | Premium positioning |
| Conversion Y1 | 0% | Focus on base distribution |
| Conversion Y2 | 0.25% | Early adopters |
| Conversion Y5 | 1.00% | 60,000 premium members |
| Churn | 10% annually | Higher engagement = lower churn |
| CAC | $50 (digital only) | Upsell to existing base |
Consolidated Revenue Build
| Year | Employer Group Lives | DPC Lives | Total Lives | Premium Members | Total ARR |
|---|---|---|---|---|---|
| Y1 | 100,000 | 50,000 | 150,000 | 0 | $1.17M |
| Y2 | 500,000 | 150,000 | 650,000 | 1,625 | $8.29M |
| Y3 | 1,500,000 | 300,000 | 1,800,000 | 9,000 | $31.86M |
| Y4 | 3,000,000 | 600,000 | 3,600,000 | 27,000 | $81.54M |
| Y5 | 5,000,000 | 1,000,000 | 6,000,000 | 60,000 | $165.60M |
Cost Structure & Support Model
Automation-First Operations
| Component | Coverage | Human Involvement |
|---|---|---|
| Medication Reminders | 95% automated | 5% escalation |
| Appointment Coordination | 90% automated | 10% complex cases |
| Refill Management | 98% automated | 2% issues |
| Family Updates | 85% automated | 15% concerns |
| Daily Check-ins | 93% automated | 7% follow-up |
| Overall Platform | 92% automated | 8% human touch |
Staffing Model
| Metric | Value | Notes |
|---|---|---|
| Support Ratio (Y1) | 1:1,500 | Building efficiency |
| Support Ratio (Y2) | 1:2,000 | Improving automation |
| Support Ratio (Y3-Y5) | 1:2,500 | Optimal efficiency |
| Lives at Scale | 6,000,000 | Year 5 target |
| Coordinators Needed | 74 | At full scale (Y5) - highly automated |
| Coordinator Cost | $45,000/year | Including benefits |
| Total Support Operations (Y5) | $3.3M | All support costs combined |
| As % of Revenue | 2.0% | Maintaining 90% gross margin |
Infrastructure Costs
| Component | Cost per Life/Month | Annual at 6M Lives |
|---|---|---|
| Messaging (Twilio) | $0.06 | $4.3M |
| AI Voice (Vapi) | $0.05 | $3.6M |
| Cloud Infrastructure | $0.04 | $2.9M |
| Data & Analytics | $0.03 | $2.2M |
| Security & Compliance | $0.01 | $0.7M |
| Total Infrastructure | $0.19 | $13.7M |
Unit Economics & Cash Efficiency
Per-Member Economics
| Metric | Value | Calculation |
|---|---|---|
| Blended Revenue/Life/Month | $2.30 | Weighted average all tiers |
| Infrastructure Cost | $0.19 | 8% of revenue |
| Support Cost | $0.05 | At 1:2,500 ratio |
| Gross Margin per Life | $2.06 | 90% margin |
| CAC | $0 | Partner-owned distribution |
| Payback Period | Immediate | No CAC to recover |
Margin Evolution
| Year | Gross Margin | EBITDA Margin | Notes |
|---|---|---|---|
| Y1 | 87% | 9.7% | Initial scale inefficiencies |
| Y2 | 90% | 41.0% | Automation improvements |
| Y3 | 90% | 53.9% | Operating leverage |
| Y4 | 90% | 66.1% | Mature operations |
| Y5 | 90% | 72.1% | Full efficiency |
Capital Plan & Milestones ($1.6M Seed)
Use of Funds Allocation
| Category | Amount | % | Key Deliverables |
|---|---|---|---|
| Product & Engineering | $520,000 | 32.5% | AI platform, automation, APIs |
| Growth & Commercial | $400,000 | 25.0% | Employer Group/DPC partnerships |
| Operations & Support | $520,000 | 32.5% | Salaries/wages for coordinators, operations team, and support staff |
| Compliance & Legal | $120,000 | 7.5% | SOC 2, HIPAA, contracts |
| Working Capital | $40,000 | 2.5% | Operational buffer |
Sensitivity Analysis
Premium Conversion Sensitivity (Year 5)
| Conversion Rate | Premium Revenue | Total ARR | Impact |
|---|---|---|---|
| 0.5% | $59.4M | $106.2M | -36% |
| 1.0% (Base) | $118.8M | $165.6M | Base |
| 1.5% | $178.2M | $225.0M | +36% |
| 2.0% | $237.6M | $284.4M | +72% |
Lives Growth Sensitivity (Year 5)
| Total Lives | Base Revenue | Total ARR | Impact |
|---|---|---|---|
| 4M (-33%) | $31.2M | $110.4M | -33% |
| 6M (Base) | $46.8M | $165.6M | Base |
| 8M (+33%) | $62.4M | $220.8M | +33% |
Automation Rate Impact
| Automation | Support Ratio | Gross Margin | EBITDA Impact |
|---|---|---|---|
| 85% | 1:1,500 | 85% | -15% |
| 92% (Base) | 1:2,500 | 90% | Base |
| 95% | 1:4,000 | 93% | +10% |
Risk Factors & Mitigations
Key Risks
| Risk | Probability | Impact | Mitigation |
|---|---|---|---|
| Employer Group adoption slower | Medium | High | Multiple channel strategy |
| Premium conversion <1% | Low | Medium | Conservative base case |
| Automation <90% | Low | High | Proven AI capabilities |
| Competition | Medium | Medium | First-mover advantage |
| Regulatory changes | Low | Low | Non-clinical model |
Conservative Assumptions Built In
- Only 1% premium conversion (industry benchmarks suggest 2-5%)
- No price increases over 5 years
- Linear growth rather than exponential network effects
- No additional revenue streams (data insights, pharma partnerships)
- Higher support costs than pure software companies
Comparison to Industry Benchmarks
| Metric | Local LifeCare | Industry Average | Advantage |
|---|---|---|---|
| CAC | $0 | $500-$2,000 | Zero-CAC distribution |
| Gross Margin | 90% | 60-70% | Automation-first |
| Support Ratio | 1:2,500 | 1:200-500 | 5-10x efficiency |
| Integration Time | Seamless | 3-6 months | No clinical systems |
| Payback Period | Immediate | 12-18 months | No CAC to recover |
Glossary
- PEPM: Per Employee Per Month (Employer Group pricing model)
- PMPM: Per Member Per Month (DPC pricing model)
- CAC: Customer Acquisition Cost (zero in our model)
- Employer Group: Organizations that manage benefits for multiple employers (formerly known as Third-Party Administrator or TPA)
- DPC: Direct Primary Care
- ARR: Annual Recurring Revenue
- LTV: Lifetime Value
- COGS: Cost of Goods Sold
- EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortization