Giraffe Racks

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					                 Business Plan Presentation
Tyler Hutchens
Dave Ryan
Gary Tobin
Carrie Xing
Agenda
   The Problem
   Giraffe Rack Solution
   Marketing Strategy
   Operations Strategy
   Financial Plan
   Questions
Bicycle Rack Market trends
   SUV Sales are increasing as a percentage of
    total vehicle sales.

   Sales of racks to SUV owners are increasing by
    15% annually.
People Want Roof Racks
   “Most people would rather use a roof rack, but
    can’t because of the vehicle size”
    Bobby Noyes, founder, Rocky Mounts, Inc.
Roof Racks can be tough to use
   “I get hurt far more often loading and
    unloading my bike than riding it.”
    Pam Simich, Director, VeloNews Magazine.



   “I’ve seen people use ladders…”
    Margaret Principe, Counselor, Englewood High School.



   “I constantly struggle to get my bike on
    and off of my car.”
    Christy McDevitt, Physician, Kaiser Permanente.
Our Solution
               Get the rack to the bike,
               not the bike to the rack!
Giraffe Rack




               Rack Design
Giraffe Rack




               Rack Design
Giraffe Rack




               Rack Design
Giraffe Rack




               Rack Design
Giraffe Rack




               Rack Design
Giraffe Rack




               Rack Design
Giraffe Rack




               Rack Design
Giraffe Rack




               Rack Design
Giraffe Rack




               Rack Design
Giraffe Rack




               Rack Design
Giraffe Rack




               Rack Design
Giraffe Rack




               Rack Design
Giraffe Rack




               Rack Design
Giraffe Rack




               Rack Design
Giraffe Rack




               Rack Design
Giraffe Rack




               Rack Design
Giraffe Rack




               Rack Design
Giraffe Rack




               Rack Design
Giraffe Rack




               Rack Design
Giraffe Rack




               Rack Design
Innovative Design
   Yakima and Thule complementary
   No need to design to vehicle types
   Easy to use
Marketing Strategy
Market Size
   2005 SUV rack market = $215M

   Total Market Potential = $630M
Focused Strategy
   Roof rack accessory
   Compatible product
   SUVs
Customer
   Survey Findings
       Bike enthusiasts
       SUV owners
       Women
       Vertically Challenged
       Already own/shopping for roof rack
Pricing Strategy
   MSRP = $150.00
   Retail discount = 45%

   65% surveyed will pay $150
Retailer
   Specialty Stores
   Good discount for merchant – 45%
   Can sell to existing rack customers
   Additional installation revenue opportunity
Rollout Year One - Colorado
   Great Market!
       Most SUVs per capita
       High concentration of bicyclists
       Wealthiest counties in Rockies
   Sales, Sales, Sales
Ongoing Rollout
   Year Two
       Colorado mountain towns
       California, Portland, Seattle
   National Rollout in Year Three
   180 stores by Year Five
Brand Image
   Targeted Advertising
       Print ads, point-of-purchase displays
   Guerilla Marketing
       Demo units
       Events
Giraffe Rack Advertising
Brand Image
   Targeted Advertising
       Print ads, point-of-purchase displays
   Guerilla Marketing
       Demo units
       Events
Talented Management
   Dave Ryan – President
       10 years experience in early-stage companies
       Experienced Sales and Marketing
        Management
   Tyler Hutchens – Vice President
       7 years experience in Marketing, Promotion,
        Operations, Finance
       Experience with early-stage companies
Operations Strategy
Operations Plan
   Major Features:
       Complements Sales and Marketing
       Low fixed costs
       Outsource
Scope of Operation
    Outsource design
    Contract out to manufacturers for
     tooling and production
    Minimal assembly and packaging
Key Success Factors
   Strong supplier relationships
   Strong retailer relationships
   Management involvement
Development Timeline
   Concept R&D (30 days)
   Product Development (55 days)
   Product Release to Manufacturing (50 days)
   Manufacturing Ramp-up (85 days)

          Total Duration 220 Days
             (Dec ’01 – Oct ’02)
Financial Plan
Giraffe Rack Gross Margin
   Selling price of $82.50
   Cost of goods sold $41.80
   Our Gross Margin is 49.3%
       Outdoor Products average = 38.8%
       Higher for Marketing Costs
Giraffe Rack Revenue
   30 retail outlets in Year 1
   Average 100 units per location

   Year 1 Revenues = $247,500
   Year 1 Operating Expenses = $182,675
   Year 1 Earnings = ($180,776)
Revenue Growth

   $2,500,000

   $2,000,000

   $1,500,000

   $1,000,000

     $500,000

           $0
                    1          2          3           4          5

Annual Revenue   $247,500   $544,500   $998,250   $1,536,150 $2,168,100
Giraffe Rack Cash Flow
$500,000

$400,000

$300,000

$200,000

$100,000

       $0

($100,000)

($200,000)
              1          2           3          4          5

Cash Flow ($158,861) ($130,126)   ($5,539)   $183,873   $454,338
Giraffe Rack Cash Flow
   Highly seasonal sales
       75% coming between April and September
   Cash need early, excess later
Giraffe Rack Funding
   Owners will contribute $60,000
   Raising $200,000 in debt
       Repaid $500,000 at the end of Year 5
       Offers a 20.1% compounded return
            Interest expensed and accrued each year
Giraffe Rack Cash Flow (b)
$400,000
$350,000

$300,000
$250,000
$200,000

$150,000
$100,000
 $50,000

     $0
             1          2          3          4          5

Cash Flow $101,139   $127,099   $225,506   $391,768   $57,262
Giraffe Rack Growth
  $150,000
  $100,000
   $50,000
         $0
   ($50,000)
  ($100,000)
  ($150,000)
  ($200,000)
                  1         2        3         4        5
 Earnings      ($180,776) ($19,546) $76,601 $119,771 $119,675
 Net Margin                        7.67%     7.80%    5.52%
Giraffe Rack Exit
   Acquisition by a larger company

   Licensing agreement with a larger
    marketing/manufacturing organization
       Manufacturing and distribution turned over
       Marketing and royalties negotiated
Wrap Up
   Market need
   Strategy
   Investment
Questions?
Cost of Goods Sold

      Component                Quant   Cost     Total
      Pivot Plate                4      $1.50    $6.00
      Outer Bars                 2      $1.75    $3.50
      Inner Bar                  1      $2.75    $2.75
      Mount Bar                  1      $2.00    $2.00
      Piston/spring assembly     1     $12.00   $12.00
      Handle Assembly            1      $5.50    $5.50
      Bushings                   8      $0.25    $2.00
      Hardware                  12      $0.15    $1.80
      Packaging                  1      $0.25    $0.25
      Labor                     0.5    $12.00    $6.00
      Total                                     $41.80
   Giraffe Rack Growth
                      Year 1      Year 2      Year 3    Year 4     Year 5
Units per outlet           100         110         121       133        146
Outlets                      30          60         100       140        180
Selling Price           $82.50      $82.50      $82.50     $82.50     $82.50
Revenue               $247,500    $544,500    $998,250 $1,536,150 $2,168,100

                   Assumptions
                   Yr.1 Locations               30
                   Yr. 1 Units Per Location    100
                   Sales growth/yr             10%
   Giraffe Rack Growth

                      Year 1      Year 2      Year 3     Year 4      Year 5
Revenue               $247,500    $544,500    $998,250 $1,536,150   $2,168,100
Gross Profit          $122,100    $268,620    $492,470   $757,834   $1,069,596
Operating Expenses    $182,675    $239,885    $357,883   $568,422     $789,131
EBIT                 ($140,575)    $28,735    $134,587   $189,412     $280,465
Net Earnings         ($180,776)   ($19,546)    $76,601   $119,771     $119,675
% of Revenue                                     7.67%      7.80%        5.52%
   Giraffe Rack Cash Flow

                          Year 1       Year 2       Year 3      Year 4      Year 5
EBIT                     ($148,861)     $28,735     $134,587    $189,412    $280,465
Investing Activities      ($10,000)       -         ($10,000)      -        ($10,000)
Net Cash Build (Burn)    ($158,861)     $28,735     $124,587    $189,412    $270,465
Beginning Cash Balance         -      ($158,861)   ($130,126)    ($5,539)   $183,873
Ending Cash Balance      ($158,861)   ($130,126)     ($5,539)   $183,873    $454,338
   Giraffe Rack Cash Flow (b)

                          Year 1      Year 2     Year 3      Year 4      Year 5
Cash Flow From Ops       ($148,861)    $25,960   $108,407    $166,262   ($124,506)
Investing Activities      ($10,000)      -       ($10,000)      -        ($10,000)
Net Cash Build (Burn)    ($158,861)    $25,960    $98,407    $166,262   ($134,506)
Increase (Dec) in Debt    $200,000       -          -           -       ($200,000)
Beginning Cash Balance    $260,000    $101,139   $127,099    $225,506    $391,768
Ending Cash Balance       $101,139    $127,099   $225,506    $391,768     $57,262
 Giraffe Rack Repayment

                            Year 1    Year 2    Year 3    Year 4      Year 5
Beginning Debt Balance   $200,000 $240,225 $288,540 $346,573        $416,277
Interest Rate               20.1%     20.1%     20.1%     20.1%       20.1%
Interest Expense           $40,225   $48,315   $58,033   $69,704     $83,724
New Debt                   $240,225 $288,540 $346,573 $416,277     $500,000