The toilet stepper seat idea would not be at a high level of capital intensity because the product would not be costly to make. The main materials used in making the toilet stepper would be an inexpensive metal material, along with plastic casing around the metal frame which would also be an inexpensive material. The main costs would be the research and development of the product, finding the company to manufacture the parts, marketing and advertising, and the initial rollout of the product.
The most important immediate capital needs would be the research and development of the product to find out exactly what was needed to make the toilet stepper work. Another immediate capital need would be the advertising the product to the public and getting the consumer aware that our product is out on the market. The important long term capital needs would depend on how successful the first couple of years are for our company.
If the company is to succeed and have a high rate of return on the product, then there would be potential for a new office, warehouse, the hiring of personnel, a higher degree of marketing and advertising. If the company is slow in making a profit, then it would take longer period until capital was needed to purchase the above listed items. On a scale of 1-5 on capital intensity, the company would be between a 1-2 at the start-up point bvecause our company is not going to mass produce, but slowly build our way to future expansion.
The flip toilet would also be a product that should interest investors since it is a relatively obscure item on the market. This product, however, has the potential to win over consumers because of the value that it brings: sanitary toilets, ease of use, and eliminating the question of the position the toilet seat is in. This product brings value to a customer and does not have many competitors; therefore, it should attract investors. However, since we are going to be financing the company ourselves, the company will not be looking for any investmentors to help start up the company. If in future years we find that we would not be able to finance expanding the company as we would like, then there would be chance that we would look for outside investors to join in the project.
The company at this point is very reliant on the availability of investment capital. All three of the owners, Jim, Louie, and Jillian, have financial resources in their family that can be fallen back on if necessary. The estimated amount of capital that is in reserve if necessary is approximately $250,000. There was no real effort in bootstrapping the business. Since the company has many financial resources through family members, bootstrapping was not necessary.
Financial Assessment The owners, Jillian, Jim, and Louie, will be putting in $15,000 dollars of their own money to start up the company, which will total $45,000. The start up money will go primarily to the research and development, advertising, the product parts, and employee wages. The total amount that we figure to spend in the first month of operations is $5,000 on research and development, $2,000 on advertising, $3,456 on product parts, and $1,800 on employees. This will give a total of $12,256 worth of expenses for the first month of business. The company figured these amounts based on the fact that we are assuming that research and development will be roughly only $5,000, possibly being more, but not too much of a variance.
Product parts will be roughly $3,456 based on the fact that we are looking to purchase the toilet seat from the company Beneke or Bemis, which both sell a toilet seat for roughly $6, wholesale price, per toilet seat. We then figure that we would have to pay about $3 for the parts, per toilet, for the lever which lifts the toilet seat. We are hoping to have three employees working for us who will mainly assemble and package the products, and maintain the shop.
The shop will not be of any cost to the company because that will be given to us from Louie's father, who has an auto shop that he is retiring within the next year. We will have to pay once we sell the shop and move to a future location or sell the company. The tools will also be supplied from the shop that we take over. The Internet site will also not have a cost for us since the company has a friend willing to start for us, and then Louie will be able to maintain the website. Advertising will cost $2,000 in the first month. The company is expecting to spend about $15,000 for the first year in advertising and breaking the cost of this throughout the year.
We are looking to sell between 5,000 and 6,000 units of the toilet stepper within the first year. We figure that in the first year we will not be expanding the company, waiting to see how well the product is selling after the first year. We are setting a price of $30 for each toilet stepper, which would give us sales of between approximately $105,000 and $126,000. We will have to sell between 96 and 115 units per week. We figure that, with a couple of sales to construction companies, these marks will be within reach. With total costs not being high, mainly because we are being given many resources, the company is looking at total costs being around $52,880 for the year.
This is broken down into $9 for parts per toilet, research and development of $5,000, advertising of $15,000, employee wages $28,080, and general wages of $4,800 ($400 a month). This would give us a net income of $52,120. This would be divided among the three owners and, depending on what we were hoping to do in the next year, possibly put back into the company for expansion. Overall Attractiveness of Investment The overall attractiveness of this investment is that the cost for producing the toilet stepper is not really high because of all of the capital that was given to us by Louie's father and how inexpensive it is to produce the product. The break-even point in units is 2,280, which is a low number for the year.
This means that we would have to sell about 44 units per week to get the $45,000 dollars that the three owners put into the company at the beginning of the year. The rate of return that we are looking at is about 115% on three owners' investments. The rate of return is high, but that is also because the net income is high, since our costs are low. The rate of return could change, of course, depending on what the plans for the company are in the future.
Chantanuser, Wichit. "Bowled over: Toto of Japan Elevates Mundane Bathroom Fixtures" Bangkok Post 27 May 2005