| Many people have great ideas for inventions. These | | | | .$155,600.00Total From Prototype and Legal......... ...... |
| thinkers amongst us may have a new innovation, | | | | $184,075.00Perfect World Grand Total Start Up |
| better mousetrap, or a totally new concept. Perhaps | | | | Costs... $339,675.0030% Fudge Factor and |
| you have an idea you would like to see come to life | | | | Murphy'ism......... ...$101,902.50Real World Start Up |
| and receive the royalties for it and live happily ever | | | | Costs......................... $441,577.50- - - - - - - - - - - - - - - - - - |
| after. Unfortunately many folks who have such ideas | | | | -Indeed what seemed like a really easy to make |
| spend their life savings going after a dream of their | | | | product turned into a complete nightmare for Mr. Bob |
| own invention. They fall in love with their idea and | | | | Smith the founder who needs a $5,000 per month |
| want to see it come to fruition and mass marketed | | | | income to survive or even be able to quit his job. |
| to the world.It is wonderful to see so many garage | | | | Already now we have the first one year expenses |
| inventors coming up with so many nifty gadgets. But | | | | at over $440,000.00, which is not chump change for |
| it is also important before you risk you hard earned | | | | the guy who just invested a very useful and needed |
| dollars to be very careful with what you wish for. | | | | product for walkers and joggers to stay in shape |
| Bringing even the simplest product to market is not | | | | with.For first year startups considering only the |
| cheap and very few actually succeed. In this case | | | | prototypes being sold and no actual unit sales, which |
| study we will analyze the reality of a seed to weed | | | | is possible, but unlikely we see that what seems like |
| concept and look into the formation of a small | | | | a great product is hardly cheap to make and bring to |
| business to make, market, and sell this product. The | | | | market. Let's say for instance that at 50% gross |
| fictitious product or widget as they call them in MBA | | | | profit margin per widget sold or $15.00 of the $29.95 |
| school is called a JoggingLight. It is a relatively simple | | | | target price, that means year one to break even |
| invention, a light, which is powered by the human | | | | would be 24,439 units would need to be sold. That |
| motion while jogging rather than a battery, so people | | | | seems plausible. So on a "Go or No Go" choice it |
| can work out after dark and have light while they do | | | | appears to be a viable business, even with some |
| so. Now then, first we start out with some real world | | | | mistakes along the way as you roll with the punches |
| costs below;The JoggingLight | | | | and fouls. You could also make a few dollars on the |
| Financial RequirementsPrototypes:Parts $ | | | | handling labor costs and thus add $5.00 per unit profit |
| 8,600.00Modification Costs 2,000.00Tools | | | | there if you did in-house fulfillment and charged |
| 1,250.00Work Shop Set Up 1,500.00Misc. Equipment* | | | | $10.00 thus cutting down the number of units need |
| 2,000.00Installation 250.00Back Up Generator (Honda) | | | | to be sold by approximately 25% to 18,110 units for |
| 1,200.00Vacuum 200.00Injection Molding Engineering | | | | a year one ROI kill date.If you were able to stay out |
| 12,250.00Plastic Cover Prototypes 25,200.00Human | | | | of our fudge factor, unless needed for real R and D |
| Testing 800.00Ergonomic Testing (Cal TECH) | | | | next generation stuff, you might be able to also cut |
| 10,000.00Research Paper (Interns) 10,200.00Digital | | | | 20% off that $339,675.00 figure or $271,740.00 and |
| Photos and 3D Renderings 8,800.00Sales of Original | | | | made your $15.00 per unit profit plus $5.00 for |
| Prototypes...............Sub Total $ 82,250.00Business Set | | | | in-house fulfillment or $20.00 per unit then you could |
| Up:Incorporation $ 1,500.00Parasite Lawyer Retainers | | | | be home free at 13,587 units sold prior to end of |
| 8,000.00Federal Registration of Trademarks | | | | year one, from the day you cash the investors or |
| 1,875.00Concept Patent Filings, Modifications | | | | Venture Capital check. That seems very doable |
| 35,000.00Procurement Business Registration | | | | indeed.Not the easiest business in the world, but if |
| 4,800.00Miscellaneous Legal Docs 675.00CA Trade | | | | Bob will walk before he runs run here, you can see |
| Marks 1,500.00Patent Defense and Negotiation | | | | he might find it possible to shatter these goals prior |
| Fund..............35,000.00Manual Creation for Consumer | | | | to end of fiscal year one. Should we throw this case |
| Product 1,000.00Manual Creation for Industrial Product | | | | study in the trashcan? Is this a feasible endeavor for |
| 3,000.00Business Licenses/F.N.S. Etc. 500.00Travel | | | | Bob, father and husband in a family of five? Should |
| Expenses for Business Set Up 2,000.00BBB and | | | | we further look at a better case scenario than the |
| Chamber Memberships 1,500.00Finish Products Liability | | | | one listed which many could consider next to worse |
| Insurance (DP) 3,675.00Business Insurance Down | | | | case scenario above? Do we sharpen our pencils for |
| Payments 1,800.00Sub Total.......................$101,825.00Start | | | | Bob and continue, keep assumptions or quit? We |
| Up Costs Before Marketing....................$184,075.00- - - - - - | | | | need to be honest with Bob too, because "falling in |
| - - - - - - - - - - - - -The JoggingLightFinancial | | | | love" with a business or product can make you dead |
| Requirements | | | | or broke. This should only be about winning and |
| Post Business Formation and PrototypeMarketing | | | | making money, as Bob Smith the founder of the |
| Costs:Repayment of Loan for Website Creation $ | | | | JoggingLight has built up a nest egg for his family, |
| 2,900.00Television Infomercial 54,400.00Art Work for | | | | should he risk it all on this new widget; The |
| Logo 1,400.00Stationary, Business Cards, Etc | | | | JoggingLight?What are your thoughts on this Case |
| 500.00Additional Website Ongoing Work 8,000.00Air | | | | Study; in analyzing a prototype project and it's costs |
| Time for Product over basic package | | | | for a Start-up Company? Would you go with Bob's |
| 20,400.00Travel Sales Costs..................................... | | | | project or reject it? Do you as a business student |
| 5,000.00Promotional, Sponsorships........................... | | | | think it is feasible? What is the basis for your |
| 5,000.00Sub Total $93,100.00Salary Costs:Bob Smith | | | | answer? Are there real life places you could shave |
| Founder (one year) $50,000.00Health Care | | | | costs? Remember it would be better to be wrong on |
| Costs...................................... 6,000.00Casual Labor 6,500.00Sub | | | | the downside than out of business with an |
| Total $62,500.00Total Anticipated Start Up | | | | unforeseen blindsided problems that could wipe Bob's |
| Costs:Total From Marketing and Salary............... | | | | hard earned nest egg out. Think on this. |