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Technoturf Technoturf Document Transcript

  • Taylor Bayles, Grace Myers, Charles Meller, Andres Policastro, Matt Robinson
  • TechnoTurf 2 Problem Whether you are the parent in the stands of your child’s lacrosse game, or the hard working athlete yelling to the referee, we’ve all said it; “Which line is out?” Artificial turf fields, with lines for 2-3 different sports have become increasingly common in high schools and universities. While these fields are used to save money and space, they also create confusion and annoyance that detract from the athletic experience. Players end up stopping at the wrong line, and poor mothers are left even more perplexed by the rules of the sport. What consumers need is a field that not only saves them money and space, but does so without compromising the athletic experience. They need a new lining system for turf fields. TechnoTurf’s Solution Enter fiber optic turf. Fiber optics are plastic filaments that enable light to be refracted throughout the fibers. Artificial turf is manufactured synthetic fibers, made to look like natural grass. The TechnoTurf idea is to infuse these two substances and create fiber optic turf. We would be combining the durability of turf with the versatility of fiber optics. Fiber optic material and sports turf material have similar properties, so the line marking fiber optic can be mixed with the turf grass without interfering with the surface characteristics. TechnoTurf will use fiber optic turf to create a new lining system for multi-sport fields. We will provide our turf through a process called retrofitting. This process is currently used to install all colored lines on traditional turf fields. For these fields, the green turf is installed, all lines are cut out, and then the colorful lines are manually added. In the same way, TechnoTurf can cut out any part of a field that a customer wants to replace with fiber optic turf. Once installed, the field will have a basic setting where all the grass is green. Then, one will be able to “turn on” lines specific to the sport they want to play at that time, displaying only those lines on the field. This technology also lends itself to the possibility of more creative and versatile personalization of the field. One could utilize the colors and effects of fiber optic LED lighting to personalize end zones, have logos, or even create colorful ads that surround the field, offering a potential for selling of ad space.
  • TechnoTurf 3 Target Market Because our fields are designed to solve what we call “the multi-line problem,” we are targeting the market most plagued by this issue: high schools. High schools typically have one turf field with lines for multiple sports, as they have neither the space nor the money to build additional fields. We believe that our product is the solution to this problem. After talking to the turf manufacturers and multiple potential customers, we have determined that multi-lines are an issue they are looking to solve, meaning our customers will be “It comes up in every consultation we have: All particularly receptive to our product. schools are concerned with multi-lined fields.” - Jimmy Weekly, X-Grass Between private and public high schools we have an impressive potential market of around 4,500 qualified customers. With such a large target, we will begin with Nashville as our first market. We chose Nashville as our primary market because of the high concentration of competitive schools. Additionally, the proximity of these schools will enhance the distribution process and will make it very easy to publicize our product to many schools that fall within our target market. After Nashville we will look to expand to other cities with similar characteristics, using regional partnerships with turf companies to get a foothold in the industry. Competitor Analysis TechnoTurf is competing with ShawSports and Electrafield, two turf manufactures that aim to create “Turf TV’s” for NFL fields. Building entire turf fields is not our primary objective; rather we aim to simply adjust and modernize already existing turf, thus establishing ourselves in a niche market. Our target market and our unique service differentiate us from our competitors. Although our competition offers a similar product, we do not believe they will be looking to enter our market. Professional sports and universities offer these companies a large market that they have not even begun to saturate. Once they exhaust the NFL, these companies will look to expand to other professional sports played on turf fields. For this reason, we believe that they have no need or interest in entering the high school market. Because of this, there should be few obstacles in our way of achieving market dominance as a fiber optic lining and custom service. Marketing TechnoTurf One of the marketing strengths of TechnoTurf is that we create a public product. We are selling fields that are going to be seen by players and fans, but also by competing teams that are going to be playing on the field weekly. We also have the added bonus of frequent publicity in local and regional papers and media coverage, as well as a strong online presence. Every time a reporter or blogger writes about a game played on our field, TechnoTurf will most likely be mentioned. This high visibility puts our fields in front of a lot of people, and allows us to create a buzz about our product without spending a great deal of money on advertising.
  • TechnoTurf 4 Additionally, as we have found that most marketing for turf is done through networking and word of mouth, we will be looking to partner with existing turf companies that already have connections in regions we wish to target. Our offer would be mutually beneficial in which we would bring them our customers who needed entire fields, and they would give us the contact information for fields they have installed in the last 1-3 years. Through this partnership, we will gain the reputation, experience, and expertise of leaders in the industry, and they will gain additional customers. Market Opportunity TechnoTurf’s standard field will cost $40,000 for us to manufacture and install, and will be sold for $100,000. This price is both profitable for us and reasonable for our customers. Brand new turf fields can range from $750,000-$900,000 making our alternative solution an affordable way to markedly improve an already existing turf field. Artificial turf is currently an industry with $648.50 million in revenues and from 2006-2011 has had an annual growth rate of 5.7%. This is expected to grow to 12.4% from 2011-2016. Value for Investors We are requesting a $1,000,000 start up investment for 30% equity of our company. This investment will cover our start up capital expenditures, research and development of our product, and supplies in order to launch within 6 months of investment. It guarantees positive cash flow for our operations until we start selling our first product in mid-year 1. We will begin selling only our mutli-lined fiber optic turf. Our projected revenues for the first 3 years are $331,843, $3,539,561, and $10,292,287 respectively. The increases in revenues come from our establishment in the industry with increasing demands and the launch of our 2nd more expensive custom product in mid-year 2. The projected year 3 EBITDA is $3,218,961, and using the 5x company valuation TechnoTurf will be valued at $16,094,806. A 30% equity gives the initial investment a $4,828,441, a 4.8 times return on initial investment. We believe based on our projected value and return, this would be a sound investment for any investor. Taylor Bayles, CEO TechnoTurf Revenue EBITDA Gross Margin Year 1 $331,843 -35,818 172,456 Year 2 $3,539,561 495,947 2,313,959 Year 3 $10,292,278 3,218,961 6,807,421
  • TechnoTurf 5 Table of Contents Section I. Opportunity Industry ..............................................................................................................6 Company/Product ………………………………………………………………........6-7 Entry/Growth Strategy ……………………………………………………………….7 Customers …………………………………………………………………………….7-8 Market Size/Trends … ………………………………………………………….…...8 Competition…………………….……………………………………………..……....8-9 Competitive Advantage..………………………………………………………….....9 Revenue Streams ……….………………………………………………………..….9 Sales & Market Share ……………………………….……………………………...10 Section II. Marketing Overall Strategy ................................................................................................10 Pricing ...............................................................................................................10-11 Service and Warranty ........................................................................................11 Advertising and Promotion .................................................................................11-12 Distribution......................................................................................................... 12 Development Task and Costs............................................................................ 12 Product Improvement/New Products..................................................................12-13 Proprietary Issues ..............................................................................................13 Section III. Operations Operating Cycle ..................................................................................................13-14 Strategy................................................................................................................15 Key Management Personnel ...............................................................................15-16 Compensation/Ownership ...................................................................................16 Advisors/Service ..................................................................................................17 Project Development Schedule ...........................................................................17-18 Section IV. Financials Critical Risks ........................................................................................................18 Revenue & Profits ................................................................................................19 Break Even Analysis ............................................................................................20 Cash Flow……………………………………………………………………………….20 Balance Sheet Highlights .....................................................................................21 COGS and Expenses…………………………………………………………………..21 Desired Financing ................................................................................................21 Use of Funds ........................................................................................................22 Investor’s Rate Return .........................................................................................22-23
  • TechnoTurf 6 Section I. OPPORTUNITY 1.1 Industry The last 8 years have seen a significant spike “One field in my conference had in the turf industry as more and more schools football, girl's lax, boys lax, soccer, and parks are switching to turf fields. Only 10 years ago it was uncommon to see a turf field and field hockey on the same field. It anywhere outside of professional sports, but was horrible because they also didn’t today a majority of high schools are purchasing have cones” artificial turf fields. This “turf boom” can be attributed to the incredible progress made by the turf industry in making turf safer and more affordable for customers. Although turf fields have high initial cost compared to grass, they are much more cost effective in the long run. Grass fields need to be maintained and relined every season, which takes time and a lot of money. Although there seems to be a major shift towards turf fields, some schools still have not adopted this trend. All of the schools that TechnoTurf talked to attributed their dislike of turf to one reason: multiple lines. Schools and professional sports teams alike share the same dislike of this problem. Many high schools we have talked to express this sole concern as their reason for not installing a turf field, as they prefer the “I hate it when they do the lines in added cost of repainting grass to the confusion of multi-lined fields. The Titans had red. About 10% of males are the same answer. They still maintain a grass red/green colorblind, which means field because the women’s soccer team plays about 10% of players and a slightly on their field twice a year. Having a turf field smaller percentage of men's officials would make it impossible for the field to be lined for both of these sports without causing are as well.” confusion. 1.2 Company and Product TechnoTurf sees our process of cutting out already existing lines and providing partial fields with fiber optic turf as a way to create our own niche market and dramatically cut costs. Fiber optic infused turf is obviously more expensive than traditional turf, so by giving the school the option of which parts of the field they specifically want to be lit with fiber optics we create a variety of potential products that can be tailored to a schools particular budget. Diagram 1.2
  • TechnoTurf 7 Diagram 1.2 outlines our soon to be patented process of developing this turf. We will have bundles of fiber optics (shown in blue) that are connected to an LED light source. LED lights have a life span of 15 years and fiber optics are extremely durable, meaning our product will last double what a traditional turf field would last. With installation taking only around 3-6 days, our process will be a quick and impactful improvement for athletic fields. Below is a breakdown of the TechnoTurf product offerings. Field Type Standard: Price $100,000 Custom: $220,000$300,000 Description Includes lines for football, soccer and lacrosse. Customers have the option to customize their field however they like - End zones - Logo/mascot/school seal - Advertisements - Sponsorship 1.3 Entry and Growth Strategy As newcomers to this market we need a strong initial entry strategy. Because we are introducing such revolutionary technology, we anticipate having a little trouble obtaining our first customer, as they may be hesitant to be the first to adopt a brand new product. To solve this problem we are offering our first field to a school at a discount. This initial field will serve as our debut field and will be the model for our subsequent sales. We will gain recognition from the public and our other target schools through the launch of this field. Using Nashville as our first market will allow us to take advantage of the concentration and competitive nature of the schools in the area. Starting with these schools means we are able to streamline the installation process and publicize our product to the entire area. Other geographic regions we have identified as profitable to our product are the greater Boston and Miami areas. Boston has a very high concentration of high schools, particularly boarding schools. Boarding schools are ideal customers for TechnoTurf because of their competitive nature and strong alumni associations. Miami is a profitable area because it has a large number of affluent private schools in a region that does not support grass fields well. Miami schools use turf more than other regions because of weather concerns, therefore confirming a large number of qualified customers in this region. 1.4 Customers There are 30 private high schools in Nashville, many of which would be considered qualified customers. This means they either already have turf, or could benefit from switching to turf, and have
  • TechnoTurf 8 a large enough athletic program to demand our product. Appendix 1 shows a breakdown of the private schools by size, athletics, and type of field in place. Within public schools we will specifically be looking to athletic booster clubs and sponsors to fund the fields. We understand that booster clubs play an important role in reaching out to sponsors to fund something like a TechnoTurf field. We predict that sponsors will be interested in promoting their businesses by advertising on our field. Through speaking with executives in the Nashville area, we have learned that it is very common for businesses to sponsor sports teams and athletic facilities, especially if executives have children in the school they are benefiting. We feel confident that many individuals will be interested in putting their company name behind such an innovative product. Private schools have the same need for our product, but with the added desire to stand out amongst their competitors. This competitive nature is what we believe will drive sales. A TechnoTurf field would be an excellent selling point for any school, as it shows potential students that the school puts a strong emphasis on athletics and is devoted to giving their students the best facilities and experiences. This is a strong advantage in recruiting athletes and students. Alumni bases in private schools are responsible for funding most school additions. By targeting alumni boards and organizations, TechnoTurf will be communicating directly with the source of funding. We believe that alumni who would already be donating a standard turf field would be excited by the prospect of adding a unique and revolutionary TechnoTurf field to their alma mater. 1.5 Market Size and Trends There are about 45,000 high schools in the country, 27,000 of which are public and 18,000 of which are private. Assuming a potential market of 10% of the total High Schools in the United States, that is 4,500 schools. Through talking to industry experts we have found that the trends in the industry include a continuous sensitivity to price as well as reliance on continuous improvements in safety and quality. Therefore, it will be important for TechnoTurf to be able to lower its prices as new products are created and development processes are streamlined. Also TechnoTurf will have to maintain strong R & D to ensure we are continuously creating the best possible product. 1.6 Competition The top competitors in the artificial turf industry are Astro Turf, Sports Turf, Shaw Sports, and FieldTurf. Astro Turf (+50 years) is the inventor of synthetic turf fields contracting their first turf field in 1966. Their advantages are being an iconic brand with years of work experience. Sports Turf’s advantage is their established customer base with over 600 installations and renovations that provide experienced knowledge. FieldTurf sets itself apart by its technology which aims to imitate grass as close as possible. They worked with athletes for years in trials and tests to develop their final product Shaw Sports is the leader in turf technology and research and are one of our direct competitors as we
  • TechnoTurf 9 have previously mentioned, as well as Eletrafield. Below is a breakdown of our competitors. Company Product Target Price TechnoTurf Retrofitted lines and customizable “turf accessories” High Schools $100,000 for standard product ShawSports “Turf TV” covering entire field. Tracks movement, displays down-lines, shows replays NFL $2.5 - 3 million ElectraField “Turf TV” covering entire field. tracks movement, displays down-lines, shows replays NFL $2.5 - 3 million AstroTurf Inventor of Synthetic Turf. (50+ years) 3 variations (GameDay Grass, PureGrass, AstroTurf 12) NFL/College $950,000 SportsTurf 1 football turf, also do sports courts, tracks and tennis (20+ Years) College/High School $800,000 FieldTurf Synthetic Turf. Alternative to grass that provides better drainage, less maintenance, and more cost effective over time. NFL/College $750,000 1.7 Competitive Advantage TechnoTurf’s advantage is that we are operating in a niche market with our product costing a fraction of our competitors. Additionally TechnoTurf is solving a specific problem that our competitors are not focusing on. We offer our customers a solution to a relevant problem but allow for customization that will dramatically enhance the aesthetics of their field and appeal to fans. We anticipate our customers being excited about our product because of the added incentive of allowing sponsors to advertise on their fields. Through this service a TechnoTurf field has the potential to pay for itself, making our product very affordable to schools. 1.8 Source of Revenue Private high schools are more likely to have monetary support from alumni and therefore will be able to afford our product. We expect that our traditional three sport retrofitting (soccer, football, lacrosse) as stated before, will cost us about $40,000 and will be sold at $100,000. When compared to the cost of an entirely new field, this price seems attractive to potential customers. Additionally, our superior customer service will allow us to make a name for ourselves as a company worth investing in. Although we anticipate most of our customers being able to afford our product, TechnoTurf does offer
  • TechnoTurf 10 payment plans specific to schools’ individual needs. These plans allow more schools to be able to afford our fields. 1.9 Estimated Sales and Market Share As mentioned, Turf is currently an industry with $648.50 million in revenues and from 2006-2011 has had an annual growth rate of 5.7%. We see this rate almost doubling as the price of these fields are dropping and artificial turf is becoming an affordable option for their fields. This is expected to grow to 12.4% from 2011-2016. Using the expected growth rate through 2011-2016, the turf industry will have estimated revenues of $888.5 million by 2015. Our projected revenues for year-end 2015 are around $10 million, which is an estimated market share of around 1.2% in the turf industry. Section II: MARKETING 2.1 Overall Strategy Our overall marketing strategy is to work with the relationships we already have to expand our TechnoTurf name. We have spoken with Jimmy Weekley from XGrass, Ryan Moriarty- Sports Turf Solutions, and Jim Dobmeier from A-Turf. Through our conversations we have unanimously heard that they industry is all about who you know. Therefore, these three companies will be extremely valuable partners for TechnoTurf in the future. All three companies have clients both in Nashville and throughout the country so have valuable connections in areas that TechnoTurf will want to expand. Marketing through these individuals will come in the form of mutually beneficial partnerships in which we will be referring customers to them, and they will be promoting our products to their customers. With the help of these partnerships, TechnoTurf will look to traditional marketing methods in order to get in front of athletic directors and schools. These mediums will include a strong online presence with informational videos and blogs. 2.2 Pricing Strategy Fiber optic turf is not currently being offered by any other companies, and no other companies are based solely on retrofitting existing turf fields. By combining two unique services, TechnoTurf created a completely unique package that we are able to offer at a reasonable rate. A TechnoTurf field offers prestige and uniqueness to any school, while still remaining practical and solving a real problem. By installing our field, a school; eliminates their multi-line problem, identifies themselves as athletically competitive, creates the opportunity for sponsors to advertise on their field, differentiates their school
  • TechnoTurf 11 from competitors, shows that they are devoted to their students, and gets positive publicity because of their revolutionary new feature. By simplifying a revolutionary technology, TechnoTurf has created an inexpensive alternative to the products currently offered. If prestige and uniqueness are not enough to entice customers, the practical value of our field will be. The least expensive turf fields run around $700,000. They can then get TechnoTurf lines installed for only $100,000, making the total cost of their revolutionary fiber optic field only $800,000, which is less than many traditional turf fields. If a client does not need an entirely new field, they can have TechnoTurf lines retrofitted into their existing turf field for $100,000. Although this product is expensive, it is an incredible value when compared to traditional turf fields that offer none of the unique benefits of fiber optics. 2.3 Service and Warranty Policies TechnoTurf is offering clients a 10 year limited warranty on every product. A new turf field lasts about 5-7 years, depending on wear and maintenance. The fiber optic system we are using has a predicted span of 15 years, while our LED lighting system has a predicted life of 13.7 years. Looking at these figures, we foresee clients needing to replace our lines not because of our technology, but because of the limitations with actual turf. When a client buys a TechnoTurf product they are getting much more than a field. Customers get around the clock maintenance, should the need arise. They also get the training and advice of our technology team, who will teach customers how simple it is to use our technology. Our customer design team will be available for frequent consultations for those wanting a custom field. Since there are so many potential accessorizing opportunities, TechnoTurf will be able to help their customers through the entire planning process. 2.4 Advertising and Promotion One of the marketing strengths of TechnoTurf is that we create a public product. We are selling fields that are going to be seen by players and fans, but also by competing teams that are going to be playing on the field weekly. We also have the added bonus of frequent publicity in local and regional papers and media coverage. Every time a reporter writes about a game played on our field, TechnoTurf will most likely be mentioned. This high visibility puts our fields in front of a lot of people, and allows us to create a buzz about our product without having to spend a lot of money on advertising. Considering the social proof that indicates we make our decisions based on those made by others, the drive to imitate others will be an important social construct on which we will focus our marketing. As consumers we trust what other people are buying. We trust our friends, but are also aware of competitors. No one in any industry wants to be outshone by competition. Because of this, when one school gets the next big thing, anyone who is paying attention will quickly follow suit.
  • TechnoTurf 12 Following the instillation of our first field we plan to release a YouTube video debuting our product. Between our YouTube video and traditional media coverage, a lot of people will hear about TechnoTurf in a short period of time. We will also take advantage of the trends toward social media and blogging. There are currently many sports blogs and TechnoTurf aims to become part of the conversation. We will target athletic directors and communities alike in order to have greater visibility within the athletic circles. Throughout this process of media coverage our TechnoTurf website will become increasingly important. Our website will be both informative and entertaining, as it will describe how our product works while also displaying videos of it. The website will have pages devoted to the media coverage of our fields, so that interested clients can easily find out what previous clients have thought of our product. The site will also have informational pages where fiber optic and turf experts explain how the technology works, so clients feel comfortable from the beginning that this technology is legitimate. 2.5 Distribution We will be buying all of our fiber optics and LED lights in bulk from our manufacturing companies in China. Through bulk orders we will be saving money per unit. This turf will be assembled in our manufacturing company in China. This outsourcing allows us to save money on turf equipment and guarantees that the turf produced is of the highest quality made by experts who specialize in turf manufacturing. The turf will then be shipped to the United States and stored in our warehouse in Nashville. We will bring the rolls of turf and LED equipment to our clients in our trucks. TechnoTurf will then install our LED lights, fiber optic turf, and complete control paneling into the existing turf field. We have calculated the instillation process to take between 3 and 6 days, depending on weather and the size of the fiber optic field the client selected. We will be contracting installers for this process through our partner companies in the appropriate region. Our instillation manager and our electrician will oversee this process. 2.6 Development Status and Tasks The development of Techno Turf has already begun. Our CTO Andres has designed our first working prototype. We will take this prototype to engineering professors at Vanderbilt University who have agreed to be our advisors. These professors have decades of experience with electrical engineering and are on the forefront of cutting edge technology, such as fiber optics. With them we will work through any inefficiency there may be in our current design. Professor Kenith Pence will help us work out any kinks in our design. After this initial design period we will make a test field and sell it for a high discount to our first customer (who agrees to participate in product testing.) During this 3-month testing period we will receive feedback to make sure that we are meeting all of our customers needs. After all final adjustments are made we will purchase a bulk order of supplies and begin manufacturing our product.
  • TechnoTurf 13 2.7 Product Plans Because TechnoTurf is a new idea, we do not expect to have a problem keeping it relevant. Right now TechnoTurf is a futuristic concept, which we hope will soon become the standard in athletic fields. Although we are not worried about its relevance, we are already thinking ahead about advances we can make with this technology, as well as related products. These products would not be launched for a few years, as we want to give our custom and multi line markets a chance to gain a foothold in the industry. Another step for TechnoTurf would be to enter the professional market and come out with our own version of “TurfTV”. This technology is more advanced and complex, but also has very high margins and would be a way for TechnoTurf to more directly compete with ShawSports and Electrafiield in their growing market. We have also discussed developing is materials for playgrounds and play areas for young children. Playground space is usually quite limited, especially in cities, so TechnoTurf is working on creating a play space that includes all court sports, including basketball, volleyball, four square, hopscotch, etc. This idea could also be utilized in gymnasiums with the same space problems, as most school gymnasiums have lines for every sport, and often serve as auditoriums and cafeterias as well. While TechnoTurf is initially targeting high schools, we have the potential to break into other larger markets. Once we have established ourselves in this industry it will be simple and very profitable to also offer our product to middle schools, youth recreational facilities, and college practice fields. Offering our products to these additional locations expands our accessible market astronomically. While a town usually only has one high school, towns may have multiple middle schools and will absolutely have additional recreational facilities. All universities with athletic programs have at least one practice field in addition to their main stadiums. TechnoTurf believes that the high school market will be most profitable for market penetration, but understand that we have the opportunity to reach a much broader market. 2.8 Proprietary Issues Our fiber optic technology is a unique idea that only a few other companies are currently working with. We will not be able to patent the turf itself, rather our way of assembling the product. Our unique development process is competitive with the few companies who are currently creating similar products, and we believe we have utilized both turf and fiber optics in the most efficient and effective way possible. Therefore, we will patent our diagram. Our product is sturdy, long lasting, and extremely well made and therefore our patent will serve to protect this intellectual property.
  • TechnoTurf 14 SECTION III: OPERATIONS 3.1 Operating Cycle TechnoTurf’s operating cycle begins by ordering bulk lines of our fiber optic turf from our partner manufacturer in China. We chose to manufacture in China because it would be much more cost efficient for a start-up. Then, we will be storing our turf in a warehouse in Nashville. Once our website is set-up and we’re ready to accept orders, our cycle begins. We get an order, flowing from the website or through direct sales. Once we have an order, we will have a crew go to the field to cut out the turf and do an analysis of necessary linear footage. After the analysis and planning, we then deliver and install the TechnoTurf within the 3-6 day installation schedule. To receive payments there will be options for payment plans in order to appeal to a variety of customers with differing financial capabilities. In order to work on customer relations and satisfaction, feedback surveys will be requested from each customer. We will also look to maintain contact for feedback in the coming years following installation to ensure customer satisfaction with our services and to ensure that TechnoTurf will be their first or only option when it’s time for an upgrade. Bulk Order Store as inventory Receive Direct Order Email Feedback Survey Receive Payment Cut out Turf Deliver and Install
  • TechnoTurf 15 3.2 Strategy Our business strategy is to emphasize the uniqueness of our product as well as the practical solution it provides. We benefit from the fact that our customers understand the process of how lines are currently installed. Therefore, they will be able to envision how TechnoTurf could be incorporated into their own fields. Because of our variety of services that include fiber optic multi lining system (mid-1st year), fiber optic logos, ads, (mid-2nd year), and fiber optic end zones (mid-2nd year), we are able to meet the needs and wants for each individual customer. The personalization of their fields with our product gives it an appeal to the general public that will increase awareness and demand for our services. The first milestones for TechnoTurf are the building of our partnerships, development of our prototype and installation of our first field. After the initial launch of our product, our next milestone will be to promote our product in the nearby geographical area of our first field to all potential customers in Nashville. The promotion of our product, along with our list of target schools, will look into the sales and installation of our next few fields. Thereafter, TechnoTurf will begin expanding throughout Tennessee and eventually throughout the country with our next target locations. For our marketing and sales we will be bringing samples of our turf into schools we are targeting. We will use our personal connections to contact the athletic directors and boosters and present our product. We will stress that our product solves a well-known problem and has the ability to be tailored to their individual needs. Our first year production milestone is to make 3 multi-lined fields, then for the following two years we are aiming to complete 118 contracts for multi-lined fields. TechnoTurf is projecting a breakeven date of mid-to-late year 2 after the launch of our customizable product. 3. 3 Management Team TechnoTurf is confident that our current team possesses the experience and drive to get TechnoTurf up and running. Through this process we have become very close and have learned about each other’s strengths and weaknesses. We have found that because of our wide array of skills and experiences, we are able to overcome any weakness one member may encounter. This team is very passionate about TechnoTurf and truly believes in the product and services we can provide to our customers. It is this dedication to our product that will motivate this team to not give up and see our idea to fruition. Taylor Bayles, a junior Communication Studies major and Corporate Strategy and Leadership and Organizations minor, is the CEO. She has a lot of leadership experience, as she was group leader in her marketing class as well as team leader in the Vanderbilt Consulting Club for two semesters. She is very good at managing and encouraging others and serves as the driving force behind the idea of TechnoTurf. Furthermore, Taylor is very persuasive, organized and personable and it is her vision of TechnoTurf that will be driving the company into the future.
  • TechnoTurf 16 Grace Myers, a sophomore majoring in Human and Organizational Development and minoring in Corporate Strategy, will be serving as COO. As Taylor’s right hand, Grace is able to contribute to a variety of the technical aspects of TechnoTurf and its operations. She has previous experience in consulting and is capable to look at the company with a different lens to think of all potential problems TechnoTurf could encounter and has the ability to come up with ways to mitigate these issues. As a TA for a managerial studies class, Grace also knows how to create and advise others on effective business plans and her experience in PR will be a huge asset to our team when trying to stir up press around our futuristic product. Matt Robinson, a sophomore majoring in Finance, will be the CFO. Matt has been the CFO in previous classes and has lead his team to first place on multiple occasions due to his attention to detail and understand of what it takes to properly finance a business. Matt has held two finance internships and through his experiences has gained valuable practice in accounting and we feel very confident regarding his capabilities to manage all financial aspects of the business. Andres Policastro, a junior Engineering Science major, will be the CTO. Andres has experience with electrical engineering and web design and plays an integral role in the development of our fiber optic technology and working for the patent of our product and its installation processes. Andres is also creating the website that will be optimized by Grace and Taylor to serve as a strong marketing tool for the TechnoTurf product. Andres also has necessary connections within the engineering department at Vanderbilt that will be very valuable when looking for consultants for our product. Charles Meller, a junior Political Science major and Corporate Strategy minor will be the CMO. Given his past experiences in both the management of retail and catering, we find that his ability to methodically tackle problems will give him the competitive edge in the position. His experiences in customer service makes him the ideal candidate for this marketing position because he is able to get into the minds of the customer and offers a unique perspective to our team. 3.4 Compensation/Ownership The ownership of TechnoTurf will be evenly distributed after the 30% equity stake for the investor(s) is settled. This leaves a 14% ownership of TechnoTurf to each founding and management team member, but it will be contractually agreed upon that any costs or expenses incurred will be evenly split if necessary. The ownership of TechnoTurf will also serve as a great motivating factor for the management team since they will be working to grow the value of their share. % Ownership Charles Meller 14% Andres Policastro 14% Matt Robinson 14% Grace Myers 14% Investor(s) 30% Taylor Bayles 14%
  • TechnoTurf 17 3.5 Advisors Consultant: TechnoTurf will have a consultant from the beginning. We will be seeking part-time consulting from Professor Kenneth Pence from Vanderbilt University. Dr. Pence is an associate professor of the practice of Engineering Management, and General Engineering. Dr. Pence has a B.S. in Engineering Science, a M.S. in Management of Technology, and a Ph.D. in Management of Technology. We are confident that he is extremely qualified to advise us through the product development and launch of our product. Dr. Kenneth Pence, Associate Professor of Engineering Management and General Engineering Research and Development: Although our CTO is capable of working on the research and development of our product, we will need to hire someone full-time to work with him to ensure the product development will be done on-schedule as we aim to build our partnerships. This full-time hire will be an Electrical Engineer who has the expertise in circuitry and programming. His expertise will help with the R&D for the product itself and the manufacturing process. Intellectual Property Lawyer: Throughout our product development, TechnoTurf will need to secure our assets through Intellectual Property by filing patents as we develop our product and installation processes. This is why we need to hire an experienced IP lawyer to guarantee the security of our assets as well as the setting of barriers to new entrants in our niche market. 3.6 Product Development Schedule We plan on installing our first TechnoTurf field by the middle of the first year. This means that in the first six months we will be allocating our funds into the patent filings and our product development and testing. In the first month of our launch schedule we will be setting up our partnership with our local turf company followed by the partnership with our manufacturer in China. We will then rent out our warehouse where we will be storing our turf and equipment and testing our products. Stage 1: Patent Week 1: File for a design patent to protect our unique fiber-optic installation and production process Stage 2: Partnerships Week 1 - Week 4 During this time we will also be looking for our partner turf company, fiber optic experts, and turf experts to be serving as advisors working up to our initial launch Stage 2: Research and Development
  • TechnoTurf 18 Week 4-Week 20 We will undergo a 4-month extensive research and development process. We will be developing blueprints for specific sports fields set-ups, develop necessary software for the control of light arrays, develop method for fiber optic filament integration into artificial turf and of course purchase necessary equipment Stage 3: Turf Production Week 20 · With all the necessary research completed, we will begin production of the turf with our partner manufacturer. Stage 4: Begin Marketing Strategy Week 20-28 We will be bringing samples of our turf into schools in all of the management team’s hometowns. We will use our personal connections with schools to contact the athletic directors and boosters and present our product and also use our partnerships Stage 5: Implement the Operating cycle as described above Stage 6: Product Development and Innovation Begin offering our alternative services, such as fully customizable fields SECTION IV. FINANCIALS 4.1 Critical Risks New Entrants: Barriers to entry into this new market are relatively high due to the cost of product development for fiber optic turf. In order to protect the company in the future from potential competitors, TechnoTurf will place patents on our proprietary integration of fiber optics and artificial turf. Competitors entering into this new industry are not unexpected, but having patents in place and suppliers locked into contracts with TechnoTurf will further raise the barrier of entry for any potential competitor. Furthermore, if a new entrant could enter the market, we will gain a competitive edge by building strong customer relationships with clients. Establishing a strong brand name by being first in this business as well as through execution and strong customer relations will further increase our competitive edge against any new entrants in this new industry. Delayed product delivery: With a tight launch schedule of six months from initial funding, any delay will negatively impact our ability to generate revenues as expected. To ensure we stay on schedule and to mitigate the risks associated with product delays, we have taken many precautions. This includes having a working prototype of the product and hiring the best engineers and consultants to ensure manufactured product performs as designed and is delivered ahead of schedule. We have contracted with multiple manufactures to ensure a timely delivery of product and reduce risk.
  • TechnoTurf 19 TechnoTurf, not the manufacturers, owns all patents and intellectual property. In addition, our initial capital requests are sufficient to cover any unforeseen delays in production. 4.2 Revenue & Profits TehnoTurf will generate revenue through the design, sale and installation of our unique fiber optic turf. Each mulit-line package will retail for an average price of $100,000, which equates to an average cost per square foot of fiber optic turf at $7.18. After year 1, we expect to begin selling and installing custom field logo and end zone packages that retail for an average of $220,000. The cost of product per square foot is the same as the retrofit package. We anticipate the sales projections to be accurate based on the lack of any direct competitors and the size of the potential market. The sales projection for year 1 is low, so TechnoTurf can put all resources into testing, improving both product and installation methods and demonstrating the product to other potential customers. A 50% deposit will be required and payment in full will be due at job completion. Financing options will be available through lending institutions we are partnering with, but the purchaser will incur the finance cost. Our projected cost of goods will be approximately 40% of net sales. Therefore our gross margin is 60%. During the first year, TechnoTurf will have a high SG&A due primarily to start up costs, but in subsequent years, the SG&A will be 49% and 32.6% of net sales. TechnoTurf will experience a net loss during the first year of operation, but with increasing sales and installations, we are able to post positive returns in all subsequent years. As TechnoTurf expands, we expect to reduce product cost due to volume discounts from our manufacturers. In our second year of operation, we anticipate a 34.63% net margin and a 33.86% net margin in year 3. TechnoTurf will have low general administrative costs since the majority of the expenses are in product cost and installation. Since the product cost is basically fixed (volume discounting reducing the cost by 15%), TechnoTurf’s profit margin increases as more units are sold, as administrative costs remain relatively flat and we expect to become more efficient at installations, maximizing the bottom line without increasing expenses. Year Revenue Year 1 Year 2 Year 3 $331,843 $3,539,561 $10,292,287 Operating Expenses $168,600 $1,734,500 $3,354,000 Operating Profit $3,856 $579,459 $3,453,421
  • TechnoTurf 20 4.3 Breakeven Analysis JAN '13 MAR MAY JUL SEP NOV JAN '14 MAR MAY JUL SEP NOV JAN '15 MAR MAY JUL SEP NOV TechnoTurf expects Cummulative Net Profits to breakeven by the third quarter of the 10,000,000 second fiscal year of operation. The 8,000,000 time to breakeven is dependent on the 6,000,000 rate of sales and Cummulative the amount of sales 4,000,000 Investment revenue generated. In year two, we are 2,000,000 dramatically increasing the product availability as well as offering (2,000,000) custom installations, which will retail for over twice the amount of the standard retrofit package. We also anticipate higher margins for the custom packages, since installation costs will drop due to centralized installations and less fitting required in end zones and field logos, compared to line retrofitting. 4.4 Cash Flow TechnoTurf will have sufficient cash reserves to keep the business operating due to conservative pro forma projections and the request for an adequate initial investment. By securing sufficient capital, we are able to fund first year operations and still have enough reserve cash on hand to provide a comfortable safety margin. Based on current projections, the company will experience a low cash balance of $524,479 in October 2014. At that projected low cash point, there are still adequate cash reserves available to safely continue operations without the need to seek additional funding.
  • TechnoTurf 21 4.5 Balance Sheet Highlights TechnoTurf’s assets are largely comprised of cash and accounts receivable. Because TechnoTurf is funded solely by equity there are no long-term liabilities. The two largest liabilities will be comprised of current liabilities and accounts payable. 2,000,000 Monthly Cash Balances 1,800,000 1,600,000 1,400,000 1,200,000 Year 1 1,000,000 Year 2 800,000 Year 3 600,000 4.6 Cost of Goods Sold and other Expenses 400,000 200,000 - Our total costs of goods sold over the 3-year span are $159,387, $1,225,602, $3,484,911 respectively, of our total revenue ($14,163,691), their sum comes out to be a 35% of costs of good sold; providing us with a $9,293,837 gross margin. Having a high gross margin gives us more room for profitability and appeal to investors. Following gross margin, our total SG&A expenses are $5,660,635; this figure includes all of the salaries and expenses coming from operations such as: vehicles, rent, insurance, consulting fees, meals & entertainment, office expenses (phone, utilities, etc.), and travel expenses. As demand for our product increases, we must increase our workforce for installations, customer service, and management. The salaries account for 54.89% of SG&A expenses. Taking into account all of these figures, our total EBITDA at the end of year 3 is $3,218,961. 4.7 Desired Financing TechnoTurf is initially seeking a $1,000,000 equity investment. Based on projections, this initial investment will be adequate to fund the first 18 months of operating expenses determined by our sales estimates. In return for the initial equity requirement, an investor will receive a 30% ownership stake of the company. In the event we are not able to secure the full amount from one investment source, we will seek a number of smaller individual investments, with the ownership percentage of the company being determined on a pro-rata basis using the original capital requirement and ownership percentage.
  • TechnoTurf 22 4.8 Use of Funds TechnoTurf will use the initial funding to pay for capital expenditures and development associated with our product. The majority of funding will be applied towards consulting and product development. One of the great strengths of our business strategy is that we will be entering the market around the time of other competitors and will be the drastically cheaper option. Of the initial investment, $187,508 is being used as our start up expenditure. $138,108 of this start up expenditure is being used to purchase our opening 2016 Potential Valuation inventory. $7,250 will go towards security deposits. This includes rent ($5000), telephone ($750), and EBITDA Multiple Value a utilities deposit ($1,500). $28,350 will go towards 3,218,961 5X 16,094,806 start- up expenses. This includes accounting fees 3,218,961 6X 19,313,766 ($2,000), insurance ($12,000), legal and 3,218,961 7X 22,532,727 consulting fees ($7,500), meals and entertainment ($2,500), office supplies ($2,000), printing brochures ($2,000), and sales tax permit ($350.) We will also need $13,800 for capital expenditures. This includes, computer equipment ($1,000), furniture ($800) and leasehold improvements ($12,000). The rest of the investment money is necessary to keep our business cash flow positive as we expect to incur a loss at the end of year one. After that, sales will start to increase, and will provide us with enough revenue to become self-funding. According to our projections, we are looking at a breakeven date around July 2014 (midyear 2). 4.9 Investor Returns With an initial investment of $1,000,000, an investor should expect to receive an IRR of 120% over the course of the first three years. Using an EBIDTA exit multiple of 5X, we project TechnoTurf to be worth $16,094,806 at the end of year 3. An investors 30% share of the company on an initial investment of $1,000,000 will be worth $4,828,441 upon the sale of the company at the end of year three. Based on realistic forecasts, TechnoTurf offers an outstanding investment opportunity for potential investors.
  • TechnoTurf 23 Appendix 1. Break Down of Nashville Private Schools School Students Athletics Turf ? School Students Athletics Turf ? Battle Ground Academy 975 Football Y Father Ryan High School 870 Football, Baseball Y Harding Academy 474 Football Soccer Y Franklin Road Academy 817 Football, Tennis N Currey Ingram Academy 312 Tennis Football N Godspasture Christian School 336 Baseball, Football N Ensworth 1,041 Football N Hendersonville Christian Academy 266 Football, Basketball N Harpeth Hall 625 Soccer Y Lighthouse Christian 412 School Soccer N Montgomery Bell Academy 713 Cross Country Y Lipscomb Adademy 1521 Football Y Nashville Academy 103 Basketball N Madison Academy 121 Soccer, N Gymnastics University School of Nashville 1,022 Soccer Y Madison Nazarene Christian Academy 142 Basketball N Brentwood Academy 780 Football Basketball N Nashville Christian School 650 Football, Basketball Y Christ Presbyterian Academy 1,062 Football Y Pioneer Christian Adademy 220 Basketball N Davidson Academy 771 Football N Pope John Paul II High School 622 Football, Soccer Y Donelson Christian Academy 755 Football Basketball Y Radnor Baptist Academy 274 Basketball N