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The O-Fold Innovation for Preventing Wrinkles: A Good Business Opportunity?

Essay by   •  February 27, 2013  •  Research Paper  •  2,395 Words (10 Pages)  •  1,800 Views

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Table of Content

Product Description Pg. 3

Business Model Pg. 3

SWOT Analysis Pg. 5

Exit Strategy Pg. 6

Angel Investors Pg. 7

Management Teams Pg. 7

Pricing Strategy Pg. 8

Funding Pg. 9

Key Risks and Controls Pg. 10

Product Description

There is an issue that needs to be faced about bringing suits or other clothing that wrinkles easily onto an air plane. Most people don't want to spend the time to check their luggage anymore, yet don't want to pack clothing that wrinkles easily into their carry-on bags. This is where the O-Fold comes into play. The O-fold is round in shape and the clothing item is wrapped around it. There is space in the interior where other items could be stored for easy travel. Once you arrive at your destination and take your clothing from around the O-Fold it is wrinkle free and ready to be worn. It is a product that you will be able to place inside your current carry-on bag which will save you time by not having to check your luggage.

Business Model

A Crawl-Walk-Run business model is the one that Alex should pursue. The first is the crawl phase in which Alex and his brother can produce the O-Fold themselves. In that phase Alex would be able to find ways to sell the finished products either door-to-door, bulk mailings, or by some other fairly simple means of distribution; such as, an O-Fold Facebook website, or a cable station where the business can target a specific audience (restructure sentence?). This will allow him to set a specific marketing budget, and it could be tailored to his specific niche. Additionally, those who are not his market audience, may come across the product while web surfing, and may want to purchase it for themselves, or give it as a gift.

While the profits are certainly limited, this part of the strategy would provide Alex with a type of low risk market research. At this stage, Alex possibly would not need angel investors; being on his own could be a benefit to him later by showing that he bore all the additional risks and garnered some market data to back up the legitimacy of his idea. He could almost certainly get a better evaluation with a company that had actually sold something then he could with a company that existed only on paper. Alex would also be able to get a feel for what the day-to-day process of running the business looks like, only on a much smaller scale. This could prove to be beneficial later on when he moves up to the walk stage.

The walk phase entails pitching the idea to angel investors; having obtained a patent, a well-developed distribution channel, and a good marketing strategy makes it easier for the investor to say yes. Alex could expect a higher valuation once he had some market data to back up his claim at this stage. Eventually, he would need to move from actually making the O-Fold to outsourcing the production. These factors would provide a potential early exit strategy for some of the investors if revenues and profits grew accordingly or some other company offered to buyout O-Fold.

The run, which is the final phase, is achieved when the company is producing large quantities and enjoying economies of scale. It would be difficult for the start up to go unnoticed at this stage, new entrants into the market would be attracted, and the entrepreneur would certainly have to have an exit strategy in mind. If Alex can make it to this stage, and he sells his interest in the company, he would stand to make a very large sum of money typically, risk follows reward, and failing at this level will result in some people losing a substantial amount of money.

The following company forecast shows the volume necessary to reach breakeven:

Crawl-Walk-Run Strategy Break Even-Analysis

start up year one year two year three

Fixed cost 1000 100 100 100

Website 10,000

Patent 2000

Professional fees 100

Sewing machine 1500

Computer software 600 600 600 600

Telephone 500 500 500 500

Office supplies 35,000 40,000 40,000 45,000

Administrative salary 12,000 12,000 12,000 12,000

Building lease 24,000 24,000 24,000 24,000

Total 86,700 77,200 77,200 82,200

Variable costs 3.50 3.50 3.50 3.50

Direct materials 2.10 2.10 2.10 2.10

Direct labor 2.25 2.25 2.25 2.25

Unexpected costs

Break-even quantity 18,645 16,602 16,602 17,677

SWOT Analysis

A SWOT analysis has been performed and was able to capture some of the key elements that may strengthen or hinder the progress of O-Fold. The areas identified are asfollows

As for distribution, there are many options for Alex to consider. Selling to retail stores was one option where it could be tough to get a foot in the door. Second, he could sell the O-Fold through a website; this represents a less costly option than the retail route. Alex could post videos about the O-Fold, provide packing tutorials, and take orders all from one website. He would have to work hard at marketing with the online route in order to generate some online traffic. Third, once the company has started generating enough revenue, he could advertise the O-Fold in travel magazines and/or airline catalogs. This option would help isolate the target market in terms of marketing effectiveness because most major airline carriers have magazines which feature merchandise that travelers might be interested in; it also would provide an easy way for the customer to place an order.

Exit Strategy

Angel investors would

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