The company is in the water purification business. H20 Industries is engaged in a specific branch of this business called "Service deionization." Within this branch, the company plans to emphasize a further service specialization known as "segregated regeneration," as opposed to "bulk regeneration." This concept is explained in the following sections.
For a simplified explanation of how deionization purifies water please see Section 3.5 (Technology).
The service products offered by H20 Industries are segregated as well as bulk regeneration of portable H20 Industries exchange tanks. The service is offered in three tank sizes of 3.6, 2.5, and 1.4 cubic feet (cu ft). In these sizes, the company will offer:
The application of portable deionized water is broad. Practically all industries using water in processing are potential accounts. Size of company is rarely a determining factor. There are applications in electronics and high pressure boilers where flow rates of several hundred gallons per minute are provided by portable exchange systems. The main unique benefits are:
Providing the service to a customer is simple, usually requiring only minimal equipment. H20 Industries is available from a large competitor, US Filter and a few small competitors, such as Fluid Solutions of Lowell, MA. However, none of the competition can provide segregated regeneration (See Competitive Analysis below).
In the Northern California area, outside of a small company in Lowell which has to farm out its regeneration business to a "DI" company in Nevada, Simply Clean in Oregon, and a couple of independent Culligan agents, there is only the very large, fully-integrated US Filter (owner of Culligan) to compete with. This company, by virtue of its size and involvement in all fields of water treatment, is not suited to satisfying small users of DI, nor are they able to respond to niche needs. For example, US Filter cannot handle segregated resin. All resin treated by US Filter is regenerated on a bulk basis, which means that various customers' depleted resin tanks are combined. This is not a problem for many users of DI, but the dialysis department of a hospital might well object to their resin being co-mingled with resin used in the metal plating industry. H20 Industries plans to specialize in portable segregated resin service. US Filter can try to service customers with a desire for segregated DI by promising to always supply tanks with new resin, however, there are technical problems with this.
US Filter's prices for cation and anion regeneration are $31.25/cu ft and mixed bed $43.05/cu ft. H20 Industries's prices for the same bulk regeneration are $32 and $43, respectively. The primary market thrust of H20 Industries's sales will be the segregated regeneration which US Filter does not offer. This product sells at a premium ($57/cu ft and $63/cu ft, respectively). Some small players in the market offer regenerated resin (not segregated) in a price range of $63 to $80 per cu ft (mixed bed).
Sales literature will be written and printed. A provision for this has been made in the projected sales and marketing expenses.
The service provided by H20 Industries is the regeneration of ion exchange portable tanks. The tanks themselves are supplied to customers on either a monthly rental basis or offered for sale. These tanks, and any other hardware, are readily available from a number of suppliers. By virtue of the owners' long involvement in the industry, they are fully knowledgeable of existing sources for all hardware, including resin, as well as the supply of the two major chemicals used in the process of regeneration. The only other variable cost of production is the salt used in the brine bath, this is also readily available from a number of suppliers.
Ion exchange is a major means of purifying water for industrial purposes. The degree of purity depends on the source of the water and it's use. Companies, ranging from car washes to the pharmaceutical and semiconductor industries all need various amounts and degrees of purified water. Ion exchange is a chemical process by which ions, or ionic substances that are considered "undesirable" in water, are reduced or removed from water by use of ion exchangers or resins. Most ground water contains unwanted dissolved substances, such as calcium and magnesium, whose molecular structure contain charged ion particles.
The most common impurities with ions of a positive charge are: sodium, calcium, magnesium, potassium, iron, and manganese. These are called cations. The unwanted dissolved substances having negative ion charges, known as anions, are: bicarbonate, chloride, carbonate, sulfate, nitrate, and bisilicate. When a substance separates into ions, each ion is now able to combine with another ion with opposite charge, even if that ion is from a totally different type of molecule. Substances only separate into ions when immersed in water molecules. For example, a molecule of hydrochloric acid is made up of a hydrogen atom and a chloride atom. Hydrochloric acid (HCL), when immersed in water, will split apart into one positively charged hydrogen cation (H+) and one negatively charged chloride anion (CL-). If sodium hydroxide (NaOH) were added to this solution, the NaOH would split into Na+ and OH-, which would combine with the opposite charges of the hydrochloric acid ions to form sodium chloride, better known as "table salt" (Na+CL-) and leftover hydrogen and hydroxide atoms (H+OH-). The field of deionization, known as DI for short, utilizes this natural phenomenon by designing a cation exchange resin which will substitute hydrogen atoms (H+) for virtually all of the other cations, and designing an anion exchange resin which will substitute hydroxyl ions (OH-) for virtually all of the other anions. By means of this process we end up with only H+ and OH- which is equivalent to H2O (water). By forming this demineralized water, we create water which is no longer a conductor. We can measure the purity using an ohm meter. Ohms measure resistance. The higher the ohm count, the lower the conductivity. H20 Industries is routinely formed to 18 mega ohms per centimeter, which is very close to zero conductivity (18.23 at 25 degrees Centigrade). Without giving lengthy chemical explanations, what happens in the process is as follows:
The regeneration process can take place at the location where the water is being purified, however, most users of H20 Industries do not install the expensive equipment to do this but simply arrange for a service provider, such as H20 Industries, to replace the tanks and perform the regeneration process off-site.
As high-tech industries, such as electronics, communications, and pharmaceuticals, continue to grow, there will almost certainly be increasing use of deionization technology and deionized water. As instrumentation and analysis procedures improve, controlling and monitoring the deionization process will be easier and more efficient, and this will, undoubtedly, help create new uses for deionization that have not yet appeared, as well as make H20 Industries more affordable to sectors now using other methods of purification. As more people in the water treatment industry become familiar with the DI process, the industry for H20 Industries and equipment will benefit.
In addition to bulk and segregated portable H20 Industries, the company plans to expand sales of filters and DI cartridges. These sales have been disregarded in this business plan, but they could become more significant in the future. These products lend themselves to mail order type sales, as they are small and lightweight. Cartridges are disposable items. H20 Industries also has plans to develop a reusable shipping container for its smallest (8" x 18") DI exchange tank so that this can also be shipped via UPS. This product will be marketed on a website, as well as through conventional direct mail and yellow page advertising.
In the future, a logical off-shoot of the DI business is reverse osmosis (R/O) used in conjunction with DI exchange tanks. The inclusion of R/O in front of the DI tanks will extend the capacity of an exchange tank by 1000%. This addition to the product line could become a substantial element of total company sales.
Reverse osmosis and electric reversing deionization are beginning to compete with exchange tank DI technology. H20 Industries plans to offer service contracts to maintain this equipment at the customer's location. This equipment may to either sold or leased.