Computer Matchmaking Service

BUSINESS PLAN

MATCHMATE, INC.

200 Elm St.
Boston, MA 02290

February 28, 1996

The authors of this plan are attempting to diversify their business by offering matchmaking franchises to others. This plan illustrates the franchisor side of planning and preparation, and serves as a counterpoint to the franchisee plans that appear elsewhere in this volume.

• description of company
• legal status
• mission statement/purpose
• stage of development
• product/services
• target markets/market analysis
• marketing/advertising/sales strategies
• competitors' market distribution
• competitors' advantages/disadvantages
• management
• long-term goals
• milestones
• financial statements

DESCRIPTION OF COMPANY

MatchMate is a custom designed, home-based, computer matchmaking service created by a marriage counselor and Fortune 100 software designer. The company provides local matchmaking services to Boston-area singles; national and international matchmaking services to singles worldwide via the Internet; and exclusive licenses to other entrepreneurs to own and operate MatchMate software using the MatchMate name and system within geographic boundaries around the world. To date, 110 local MatchMates operate in the USA and a dozen more operate internationally.

The MatchMate Internetworld wide web site, in addition to offering matchmaking services, hosts a singles' mall replete with photo gallery listings in a variety of geographic locations, and markets other singles-related services and products.

The company employs three full-time staff, three outside sales representatives, and several contract programmers who maintain and develop the web site presence.

LEGAL STATUS

MatchMate, Inc., headquartered in Boston, Massachusetts, is a limited Massachusetts company incorporated in June of 1993. From its inception in December of 1988 until incorporation, MatchMate operated as a D.B.A./Proprietorship.

MISSION STATEMENT/PURPOSE

MatchMate's explicit purpose is to help singles find compatible long-term or life partners by offering psycho-social screening through the sale of memberships to the service. The unique matchmaking system matches and cross-matches each client for 350 items of compatibility that are deemed by university researchers to be the most compelling elements in long-lasting relationships. The internal scoring system, based on surveys of how singles rank various categories, declares only those who score at 60% percent or higher.

The implicit purpose of the system is to educate and raise awareness about one's individual dating patterns and needs in terms of romantic partnership. In completing the application form, singles evaluate themselves and potential partners in terms of race, religion, education, personality traits, physical description, health, interests, lifestyle, sexual orientation, children, personal habits, and relationship goals. In the course of both completing the application and experiencing the results, singles gain valuable self-awareness and self-esteem.

The MatchMate system was designed by a marriage counselor and former social worker who believes that the pattern of dating in America is backwards. Too much emphasis is placed on chemistry, which is an undefmable component, and not enough is placed on compatibility, which is a definable component. The result is a 52% divorce rate, and that rate climbs each decade. While the service uses photos, pictures are not viewed until the after the matchmaking has occurred. Over a seven-year period, singles who met and married using the MatchMate system report only a 1% divorce rate, implying that matching for compatibility first is a more accurate method for predicting long-term relationship success.

STAGE OF DEVELOPMENT

MatchMate began as a small, local matchmaking service in Marlborough, Massachusetts. Matches were made manually while software specifications were developed and the software designed. The original client base grew the first year to 200 clients. The owners moved to Springfield, Massachusetts, where the first automated system was offered. Western Massachusetts was added as a second base of operations. Within three years the service grew to offering data base matching in all of Massachusetts and Rhode Island. The total client base in 1994 comprised 1,800 singles.

In March of 1993, MatchMate began offering licensed copies of its software as a business opportunity. The United States was divided into 150 geographic zones based on population demographics. By April of 1996, 110 units were sold in the USA.

The international territory was divided into 220 zones, and 13 have been sold since March of 1993. Since December of 1994, visibility on the Internet has increased sales to potential buyers in foreign countries by 40%.

In December of 1994, MatchMate launched an Internet Web site with several pages of information and an on-line application for local and national bases. International bases were added in the summer of 1994. By the first anniversary, the MatchMate home page was recording 40,000 hits a month. By early 1996, that figure had doubled.

In the spring of 1995, MatchMate sold its interest in Western Massachusetts as an existing base and moved its headquarters to Boston, Massachusetts. A new Boston-area base serving the metropolitan area was developed. To date, it is the only local database that the corporation owns. The corporation also exclusively owns and operates the national and international databases.

In January of 1996, MatchMate added singles' mall features to its home page. This included a photo gallery and biographical data about singles who posted in a special section called American Ads (listed by state). That section grew in the second month to include Canadian and Asian photo personals and will be further expanded to include Russian and Brazilian personals. As more international sites are sold, personals pages will be added as a service to singles who do not wish to undergo matchmaking. While this portion of the service does not match-make, it accommodates those singles who wish only to view photos and contact other singles. In February of 1996, the advice feature was added to the home page. This page allows singles to ask founder Susan Hamilton, M.S. W., questions on relationships, marriage, and dating. Initially, it is a free service. Eventually, there will be a nominal charge and the pages will become interactive. Ms. Hamilton intends this section to have an educational format in which guided discussions occur. She will monitor the discussion group at specific times, answering and posing questions. Singles' mall pages also include other products and services for singles to purchase. To date, vendors include those who provide books, tapes, newsletters, videos, gifts, and other singlesrelated services.

Future development goals include multi-media capabilities so that singles can see videos and hear the voices of singles with whom they have been matched. While the technology is available to offer these value-added services, the average user does not have the equipment to receive the presentation. Media experts project that it will be another year or two before the average computer will come fully equipped with the necessary tools for reception.

PRODUCT/SERVICES

Matchmaking: 123 local databases. Available on and off the Internet.

Enhanced Services: One-on-one, personalized services for singles who have more complicated needs. Involves personal interviews and more detailed screening of matches. Fees vary. Availability of enhanced services is at owner's discretion. Not available in all locations.

Matchmaking: National and international databases. Available on and off the Internet.

Worldwide Photo Ads: Browse a photo gallery and leave E-mail for singles. Available only on the Internet.

Licensed business opportunities in the USA and internationally.

Advice Forum, a question-and-answer page for free; professional advice on life's pressing romantic/relationship issues.

"Myths about Love," a video seminar presentation in three chapters, based on common myths about love, romance, and finding a soulmate. The video features Susan Hamilton, marriage counselor and founder of the MatchMate system.

TARGET MARKETS/MARKET ANALYSIS

According to National Demographics magazine, 42% of the population in the USA between the ages of 18 and 75 is single. Many wish to meet other singles for companionship, a relationship, and marriage. Due to the pressures of daily life in America, that goal is becoming more and more complex. Many singles have limited income, as they are single parents and cannot afford expensive services estimated at two to three thousand dollars per year.

A vast number of singles surveyed in the past seven years report that they no longer find meeting people in bars an acceptable method for enhancing their social lives. Fear of meeting someone with a criminal background or criminal intent, fear of meeting someone who is an alcoholic, and fear of being viewed as politically incorrect are all reasons why singles' bars no longer hold the fascination they did in the 1980s.

Singles also express concerns about dating people they meet at work. Women are particularly sensitive to the possibility that today's lover could be tomorrow's ex-lover/supervisor. Research suggests that women are more negatively affected by work-place romances, and many corporate policies discourage these liaisons.

MatchMate conducts ongoing polls each year asking singles what they are looking for, what they have tried, and what they hope to find. The responses indicate that the singles population is not just looking for a date. What they especially want is best described as a soulmate. They seek not only a suitable partner, but one who shares interests, goals, habits, and personality. Many have tried 900-number voice personals and found them to be too general and ineffective. As the minutes add up quickly, singles have come to realize that 900 lines can be insidiously expensive. The concept of screening people for highly desirable elements is appealing, modern, and cost-effective. Using services to find a romantic partner is no longer viewed as an act of desperation or for the "lonely heart." Services have become not only acceptable, but a welcome convenience in a frantic age.

As the singles population increases, the opportunity to meet others decreases, leaving a void filled by matchmaking services. If the service is reasonably priced and matches specific traits and characteristics, the inclination of today's single is to join, rather than be increasingly shut out of social contact.

MARKETING/ADVERTISING/SALES STRATEGIES

To reach this segment of the population, the ideal method is to place display advertising in daily newspapers, especially the weekend entertainment sections. These entertainment pages draw the attention of singles who are looking for weekend activities. One ad placed in a "weekender" has a shelf-life of the entire weekend, providing maximum exposure for the dollar.

Singles newspapers also produce strong response and further target the market share each MatchMate owner seeks. The presence of other services does not pose competition problems. Actually, MatchMate is more of a threat to the competition than vice-versa. 900-number voice personals, ever part of the singles scene, are not competitive with the matchmaking service concept. They merely serve as another alternative for the single who wants to diversify the search. Ad placement near the 900-number pages is beneficial and productive.

Arts and entertainment publications also draw the single reader and provide a format for MatchMate ads. These publications are usually weeklies, providing seven days of exposure for one placement, and costs are often below that of the daily paper. Arts and entertainment ads are not a replacement for the major daily, but a supplement to the main form of advertising.

Direct mail is a prime form of marketing the MatchMate name and service. Inexpensive post cards outlining the advantages of this unique form of matchmaking are sent to singles in a targeted community. Mail lists can be obtained from list brokers or lists can be cross-referenced from business or client lists the owner has accumulated. Lists can be developed by driving through upscale apartment complexes, recording apartment building numbers and individual apartment numbers, then sending a mailer marked "resident" to each person. It isn't necessary to know the name of the occupant. Since 42% of any given population is single, the average apartment complex holds an ideal market. Some indicators suggest that upper-end town homes and apartments actually hold the bulk of the singles population in most communities.

Distribution of door-hanger direct marketing materials provides inexpensive exposure in upscale apartment/town home communities where singles dwell. The marketing pieces go directly to the occupant and can be passed along to family and friends. Discount coupons are incorporated so occupants feel they are getting a better price and are more apt to join. Each piece is marked with a two-week coupon mandating an immediate response.

Pundits of advertising report that the wise advertiser "hits" the prospect with material three times. The MatchMate business plan includes second and third mailers to prospects who did not join the service after requesting information. The second mailer, sent three to four weeks after the initial inquiry, offers the service at a moderate 10% discount. The third mailer, sent annually in June or July, offers a significant 30% discount. (The "Summer Special" compensates for the slower registration rate that traditionally occurs during summer months, when singles are either on vacation or more socially active).

The name and address of every single who inquired about the service is entered into a master mailing list for future use. No lead is considered "dead" until that person has received at least three "hits."

Telemarketing is another technique for contacting prospects. The format used is partially a survey to determine how and where singles connect and partially an information builder. The script asks five questions and leads the prospect to agree to receive information.

Owners are encouraged to contact singles groups, like Parents Without Partners, church singles, and activity/interest groups to make presentations about the service. Informal presentations provide valuable information and encourage singles to participate without sales pressure.

Informational form letters are sent to local counselors/therapists/psychologists outlining the benefits of the MatchMate system to professionals who traditionally endorse compatibility matching. The letter explains how the service operates—by matching key, holistic elements of compatibility—and that it was designed by a certified professional. Many referrals come from therapists who have urged their clients to pursue relationships in a more realistic and logical manner than random dating offers.

Free or nominally-priced educational seminars offered to the public using the video "Myths about Love," by founder Susan Hamilton, is also an effective marketing tool. Corporate research indicates that singles are hungry for specific information on how to meet and how to select the appropriate partner. This 90-minute video answers the most frequently asked questions and, although generic, is a subtle promotion of the MatchMate system. Ms. Hamilton is available by phone for a question-and-answer period following the presentation. If the owner is using a hotel meeting room for the seminar, it is suggested that a speaker phone be placed in the room for Ms. Hamilton to address the audience.

A 45-minute audio tape is provided to all owners. This master can be duplicated at the owner's expense and mailed to prospective clients along with the brochure and application form. The tape answers the most frequently asked questions about the service and provides background information on how and why it functions so accurately. The advantage to the tape is that if the prospect isn't interested, perhaps they will give the tape to another single friend, making it an automatic distribution tool.

A marketing packet of successful ads, direct-mail post cards, telemarketing scripts, video/audio tapes, and door hangers is provided to all owners as part of the purchase price.

COMPETITORS' MARKET DISTRIBUTION

Knowing a competitor's product, how and where they distribute, and the efficacy of their plan is important to each new owner. Owners are instructed to shop the competition by researching local Yellow Pages. In most cities, the research will reveal a collection of "Ma & Pa" services, most of which are not computerized and therefore will only be able to serve a finite number of clients, and the more well-known companies like Dream Mates, Couples Alone, and Singles Syndicate. By calling these companies and requesting printed information and speaking to sales staff, owners can get an overview of services and costs. The competition will not quote prices over the phone, which is a disadvantage to the wise arm-chair shopper. To get prices from these companies you must schedule an appointment, visit a local office, and sit through a long sales presentation. Your credit card information, occupation, social security number, salary, assets, and other personal data will be reviewed. Many singles complain about the high-pressure sales tactics that these companies use to sell memberships, and the inconvenience of having to stop by the office to see photos/videos of new clients each month. MatchMate clients relish the fact that they can participate by mail, fax, or E-mail, saving them valuable time and producing equal or better results at a fraction of the price.

The major competition relies primarily on direct-mail advertising to reach clients. Their return ratio is only 2%. They also use TV infomercials and radio advertising at a considerable expense, and often these costs are not absorbed by the sale of memberships. The trend for these companies is more and more toward direct-mail, where the profit margin is greater.

COMPETITORS' ADVANTAGES/DISADVANTAGES

The competitors each have a unique approach to offsetting the MatchMate system in their pitch to clients. Dream Mates uses the approach that the computer is not a personalized method for finding romance. They claim their approach is done by manual screening. Our rebuttal is that they make mistakes due to human error or deliberate oversight of data when they match clients by hand. The use of manual labor also requires more staff hours and that expense is passed on to the consumer.

Couples Alone claims to use a computer, but the software is nothing more than a data base catalog program that doesn't have internal weighting systems, nor does it match and cross-match. Many clients who have joined Couples Alone report that they were mismatched in critical areas, implying that the company either does not use its computer system or its system is highly inaccurate.

Singles Syndicate does not use computer matching, but offers a three-tiered membership plan of social gatherings of varying degrees of frequency, depending on which plan a member selects. Their fees are less than the other companies, but they have few locations nationally. Rather than formal matchmaking, the matches are made informally at social gatherings.

MatchMate's research indicates that these social gatherings have limited appeal to the average client over time. Members are less likely to rejoin after their initial membership. They feel like they've met everyone and renewal is pointless. With the MatchMate system, volume registration is the key. Each member meets so many new matches each month that renewal is a favored option. MatchMate has also determined that these social functions, if presented properly, are expensive affairs that cut into profits. Our theory is to do one thing and to do it the best. Leave the social gatherings to other types of singles businesses. It has been our experience that social functions do not make for high profits, take considerable time to develop, cost many dollars in organizational manpower, and lead to going out of business faster than other services do.

These three competitors have all made the news due to lawsuits filed by disgruntled members of franchisees. One was sued for price gouging. The suit is pending. Another is currently fighting multiple-member suits for violation of trade regulations and by its franchisees for fraud. The other has been sued by the family of a woman who was murdered by a client she met via the service. Former members of one service were so outraged that they formed an organization for the purpose of class action suits and mutual support. Clearly, these companies are doing something wrong to incur this much legal action.

Neither MatchMate nor any of its licensees have ever been sued, nor was a lawsuit ever attempted. All issues of dissatisfaction, some of which are inevitable in any business, have been resolved satisfactorily. The MatchMate reputation for reasonably-priced service, fair resolution of disputes, and quality service remains unblemished.

MANAGEMENT

MatchMate, Inc., the parent company, is owned and operated by Susan Hamilton, M.S. W., and Lawrence Hamilton, M.ED.

Ms. Hamilton is a relationship counselor, free-lance writer, and lecturer. She received her Master's in Social Work from Central University. She has held numerous administrative social work positions with charitable agencies in Massachusetts and California. She is a recipient of a Commissioner's award for Excellence in Community Service.

She is the author of feature articles in numerous national magazines, a frequent radio and TV talk show guest, and is recognized as a leading expert of computer matchmaking by industry associations.

She is the president of MatchMate, Inc., and functions as the Marketing and Sales Director for services and licensees. She also provides Enhanced Services to members who desire the personalized, one-to-one matchmaking service.

Mr. Hamilton is a computer and Internet consultant and a free-lance technical writer. He holds a Master's in Education from Dalhousie University. He taught mathematics for several years before being recruited by a major computer firm to teach computer programming. Mr. Hamilton has held positions in Fortune 500 and 1000 companies. His software design of the MatchMate system is technically unparalleled.

He is the vice president of MatchMate, Inc., and functions as Technical Support Director and Chief Financial Officer. He is also responsible for Internet Marketing and Development.

Cheryl Smith is Executive Administrative Assistant. She is in charge of data processing, employees, outside sales representatives, and client support.

LONG-TERM GOALS

MatchMate's primary goals are two-fold. First, to continue the growth of local, national, and international memberships on and off the Internet and to experience no less than the current annual 30%-40% growth rate. Second, to continue to sell licensed business opportunities to entrepreneurs around the globe. We fully expect to hold and continue our growth as the world's largest matchmaking service. As the availability of zones in the USA and Canada diminishes, the corporate goals will focus on the sale of international zones and the addition of personals for individual countries.

In addition to growth-oriented goals, MatchMate, Inc. has a commitment to fostering the development and passage of state legislation governing the regulation of trade practices in the dating/matchmaking service industry. Due to the rising number of complaints from singles in this state who have been defrauded by other services, we feel that we are the obvious change agents in this state. We hope to be able to start a grass-roots movement that will result in the passage of similar bills in other states, or federally mandated guidelines. Given the current trend toward both federal and state deregulation, this goal may require more singles to speak out against the companies who have mistreated and defrauded them. Efforts to achieve this goal are currently underway.

On the technical front, our goals include the development and addition of interactive multi-media capabilities so that singles can see videos and hear the voices of those with whom they have been matched on the Internet. While the technology is available, very few users have the necessary equipment to enjoy these more advanced services. MatchMate projects that within two years, 30% of Internet users will have the more advanced equipment to view these enhanced services. At that time, we will make them available.

MatchMate's future plans also include making the Advice Forum pages interactive and presenting seminars on topics of interest to singles. These topics will include issues on single parenting, health, investments, travel, and romantic relations, and will be delivered by other esteemed professionals. This service will be available by the end of 1996.

For licensees, MatchMate plans to coordinate singles' fairs in major cities in the USA. A singles' exhibition organizer has been hired to deliver these one-day events, which draw thousands of singles to a full day of exhibits, seminars, games, and a dance. The prototype was developed in the Boston market in November of 1995. The event, the first ever held in the Boston area, drew 800 singles and was considered a huge success. Similar events are planned for major cities as licensees develop their local singles lists and gain knowledge of other singles-related organizations in their communities. Not only does this marketing format produce on-the-spot registrations, the end result is a community-wide mailing list garnered from competitors who also attract attendees.

MatchMate fully expects to produce national infomercials and to produce two additional videos, each containing three more chapters of "Myths about Love." As promotion for the videos and the matchmaking service, Susan Hamilton will appear on various national talk shows.

MILESTONES

1993 MatchMate was voted the number 1 matchmaking service by the New England Singles Association.

1994/1995 MatchMate was rated by Entrepreneur magazine as one of the top 500 business opportunities in America and listed in their July "Business 500" edition. MatchMate will also be included in the July 1996 edition.

1995 Susan Hamilton was selected as a member of the U.S. Society of Ethical Dating Services and appointed the nation's expert on computer matchmaking. Membership to this organization is not purchased, but given for outstanding merit.

1996 MatchMate joined the Worldwide Association of Matchmaking and was appointed the northeastern USA expert on computer matchmaking. Membership is purchased, but expert status is voted.

1996 MatchMate's Internet home page was selected for a Magellan Three Star award for home page content and design.

FINANCIAL STATEMENTS

Balance Sheet

Income Statement

General Ledger

Journal Entries