Student: KM Fall 2015 Shark Tank Report (Scrub Daddy) The Scrub Daddy Before this assignment I had never heard of Shark Tank nor any of the products that came from the show. After a little research on the shows episodes I realized I actually had one of the products in my household therefore I chose the Scrub Daddy. I believe I can give an honest review on the product and maybe some helpful information for Arron Krause to look at. Arron Krause entered the Shark Tank with an idea that would make everyday cleaning easier. He went in asking for a $100,000 dollar investment with 10% equity from one of the sharks. This Scrub Daddy can change the texture of the sponge just by a change in temperature of water. When soaked in hot water the sponge becomes soft and used for gentle scrubbing, but when soaked in cold water the sponge becomes hard for scrubbing tough abrasive stains. And there's more all you have to do to get the residue off the sponge is submerge it in warm water and the gunk washes right off. What Products did the Sharks invest in? Why? After Arron Krause's outstanding presentation on the Scrub Daddy and a bit of a bidding war she ended up investing $200,000 for 20% equity. That was double the investment and equity that Arron was asking. Lori Greiner had all of the connections from QVC, Infomercials and retailers worldwide that would make the Scrub Daddy the number 1 successful product to come from the Hit Series Shark Tank. I believe Lori Greiner knew from the minute Arron Krause finished his presentation she could run with this idea, after all Arron's presentation was almost like a tiny infomercial. He had great examples from showing how the sponge changed in water temperatures to laying a 10-pound weight on the cold sponge to prove its strength. Then he went and started cleaning a glass stove top with burnt sauce on it, and removed with ease and left the stove top scratch free. He showed its versatility when switching over and cleaning a large spoon with the sponge that had been soaked in hot water. What was the valuation if the product and company? How much fund is available now? The overall evaluation of the Scrub Daddy and the company was WOW! Arron mentioned to the Sharks that he had only been up and running for four months before coming on the show. Within those four months he had made upwards of $100,000 in sales, his clientele consisted of QVC and small retailers in his hometown Philadelphia. He was coming onto the show because he wanted a $100,000 invest with 10% equity. His plans were too have his own independent running factory, which could be up and running 24/7. His major problem was inventory and not having enough of it. After a bidding war between three Sharks, Lori Greiner came out on top with the offer of $200,000 with 20% equity. Little did she know that the Scrub Daddy would be the number success story to come off of Shark Tank. How much would it cost to manufacture this Product? What are the operational (Fixed and Variable Costs)? I would imagine Arron Krause would want his independent facility in his hometown so my plans are for at 30,000 sq. ft. facility in Philadelphia. To start off Arron will need a piece of land to put the facility on. I have him down for a 5 to 7 acre lot, this will give him plenty of room for the facility, parking for his workers and loading docks for shipping out thousands of Scrub Daddy's. With this size of land he is looking at upwards of $400,000 for a piece of property in Philadelphia. Next was the building cost of the facility. I found a company that could offer a fast track plan and have the entire facility done within 28 weeks. The drawing can take up to 6 weeks before being finalized by the head contractor and Arron Krause. And then give an additional 28 weeks of construction. I decided to go with a Pre-Engineered plan and that saved us $204,000, which can be used for advertising. The building costs are as follows: Pre-Engineered 30,000 SQ. FT. Facility General Construction $1,382,400.00 Plumbing $39,200.00 HVAC $78,400.00 Electrical $105,000.00 Site work $117,000.00 Land $400,000.00 Advertising $204,000.00 Total Costs $2,326,000.00 How much would you sell it for? (Would people pay this price?) During Arron Krause's presentation on Shark Tank they asked him how much the Scrub Daddy cost, his answer was they cost $1 to make and he sells them wholesale for $2.80. Since that day he has done package deals ranging from a 3- Piece set for $9.99 to a set of 5 for $19.83. I personally would rather try doing a combo pack that would include a Scrub Daddy Original, Scrub Daddy Lemon Fresh, Scrub Daisy, and a Scrub Eraser all-together for a price of $34.99. Arron has done so well with all of his other package deals that I think this Scrub Family Pack will do just as well. I would also like to start trying new scents with the Scrub Daddy's possibly teaming up with either Gain or Febreze to do one of their scents in the scrub pad. Right now the Scrub Daddy Lemon Fresh is retailing for around $3.99 I want to sell the Febreze and Gain scented ones around $5. Teaming up with such a trademark household brand like one of those will be extremely beneficial to the Scrub Daddy Corporation and will definitely bring in the buyers. Also having a scrub pad just for the bathroom. This scrub pad would be gentle on your ceramic toilets and tile showers but it would have a long extension handle to get into those hard to reach places, this Scrub Pad would retail $4.99. How many buyers do you estimate? Considering the fact that Arron Krause sold 4,000 sets of Scrub Daddy's in eight minutes in just one infomercial on QVC I think we can double if not triple the sales with these new products. Like Krause said the scrub pad doesn't sell itself on a shelf, it needs a person to demonstrate how well it works and its versatility. And since Krause is committed 100% to the company we will have no problem getting him up there to demonstrate the product. What do you expect your profits to be? Gain/Febreze Scented Scrub Daddy: Retailing for $4.99 Scrub Family Pack (Original Scrub Daddy, Scrub Daddy Lemon Fresh, Scrub Daisy, Scrub Eraser): Retailing for $34.99 Bathroom Scrub Daddy with Extendable Handle: Retailing for $4.99 (If sales increase as I expect Arron will make roughly around.) With one infomercial of the Gain/Febreze Scented Scrub Daddy. 4,000 x 3=12,000 units 12,000 units x 4.99= $59,880 in sales. Within eight minutes. With one infomercial of the Scrub Family Pack. 4,000x3= 12,000 units 12,000 units x 34.99= $419,880 in sales. Within eight minutes. With one infomercial of the Bathroom Scrub Daddy with Extendable Handle. 4,000 x 3= 12,000 units 12,000 units x 4.99= $59,880 in sales. Within eight minutes. Who are your Target Customer? The target market is your everyday household cleaner. The Scrub Daddy is so versatile that you can use to clean: Household Kitchen Counters Appliances Cutting boards Bath Fixtures and Tile Outdoors Grills Lawn Furniture Pool Surfaces Siding, Doors, Windows Auto and Marine Dashboards Upholstery Wheels Decks, Fittings Who could be your Competition? My main competition would be the major household brands like Scotch Brite, Clorox Scrub Singles, Brillo, S.O.S, and Scrubbing Bubbles Fresh Brush. Many of these names having been around your household for decades so it makes it harder to change a customers mind and switch from their traditional scrubbing brushes. These brands are not necessarily better than the Scrub Daddy it is because the customer are more familiar with the brands and have used them their entire life. The main difficulty that Scrub Daddy will have is getting the customer to change from traditional scrub pads and start using the new Scrub Daddy. The best way to get the customer to switch is having the Scrub Daddy cleaning right along side one of the other brands listed above. Once the customer sees how much better of a job it can do they will have a easier time letting go of the tradition and buying the newer model. What startup costs would you incur? I am giving myself a $50,000 to $75,000 startup cost for whichever idea the Scrub Daddy board decides to make. Whether it is the Gain/Febreze Scrub Daddy or the Bathroom Scrub Daddy with Extendable Handle. I believe it will be too risky to try both products incase they become a fail on the market. But after trying out both tester models with a select test group of customers we will find which product carries the most following from the customers. From there we will start the production line and starting adding them to the Scrub Daddy end caps in stores. Of course we will have a infomercial in the making as well so we can demonstrate the product to wider demographic market and start gaining a following. Startup Expenses Fixed: Utilities Expense- $5,000 Administrative Cost- $2,500 Insurance Cost- $4,000 $11,500 Variable: Inventory- $28,000 Shipping/Packaging- $10,000 Advertising- $20,000 $58,000 Total Expenses= $69,500 Cash Flow Analysis Plan I would like to set in motion a cash flow analysis plan this will keep Arron Krause updated daily on where his money is being spent. Operating Activities: This section will evaluate net income and loses for Scrub Daddy. It assesses sales and business expenditures. Investment Activities: This section will report inflows and outflows from purchases and sales of long-term business investments such as property, assets, products, and equipment. Financing Activities: This section will account for the cash flow trends of all money that is related to financing Scrub Daddy. Break Even Analysis Break Even Point= Fixed Costs/(unit selling price-variable costs) The break-even point is reached when my revenue equals all business costs. Gain/Febreze Scented Scrub Daddy after 12,000 units was sold at $4.99 within a eight-minute infomercial. Break Even Point= 11,500/(59,880- 58,000) 6.11 I would have to double my sales in order to cover all business costs. Scrub Family Pack after 12,000 units were sold at $34.99 within an eight-minute infomercial. Break Even Point= 11,500/(419,880-58,000) my business costs. 0.03 My revenue surpassed all of Bathroom Scrub Daddy with Extendable Handle after 12,000 units was sold at $4.99 within a eight-minute infomercial. Break Even Point= 11,500/(59,880- 58,000) sales in order to cover all business costs. 6.11 I would have to double my Individual Project You will be creating an overall operations and supply chain plan (6 months to 2 yearsi.e. short and medium term) based on a product that received funding by one (or more) of the \"sharks\" in the hit reality show Shark Tanks (http://abc.go.com/shows/shark-tank) You can choose any episodes that are available at ABC site, or at You Tube (for example, https://www.youtube.com/watch?v=8mB6lPiel38) that received funding from shark(s). As the finances are now in place, you are responsible for executing (Sales and Operations) the new business. You have been hired to lead the company by the owners (founders, and sharks). Here are the major questions that your proposal should address, What products did the sharks invest in? Why? What was the valuation of the product and company? How much fund is available now? Take into consideration of the total available fund, ownership, royalty fee. Detailed plan of product/service: Apply concepts/tool of operations and supply chain management that you learnt from this course. How much would it cost to manufacture this product? What are the operational (fixed and variable costs)? Office space/warehouse/factory rental Utility costs (electricity/water) Product costs Labor Advertising How much would you sell it for? (Would people pay this price? How many buyers do you estimate?) (online research on the industry can provide some meaningful data) What do you expect your profits to be? Who are your target consumers? Who could be your competition, and why can they be better? What startup costs would you incur? (remember there is only so much you can spend) MGMT 3306, Rupak Rauniar Calculate the breakeven point: Forecast your sales and inventory requirements. Identify your target markets and customers. Provide any information to support your sales forecast/trend. Outline your sourcing, manufacturing, distribution, and sales plan. Make any reasonable assumptions. For any business, managing cash flow is very important to stay afloat. Sales are important, but focus should be on profit margins. Efficiency and Inventory management plays key role in managing cash flows. Discuss important operations and supply chain performance measures critical to the survival and growth of this business. What are the quality attributes you would like control and manage? General Guidelines to Prepare the Report: Length of Report: 8- 10 pages Write brief paragraphs along the topics/ sub-topics Do not define any concept in your report, instead apply and analyze Use table/ charts when appropriate MGMT 3306, Rupak Rauniar