The Golf Swing Analyzer

Team 1 Team members

Agenda
Background and Key Issues Internal/External Analysis Alternatives Assessment and Recommendation Implementation Plan Contingency Plan Conclusion

Background
Chris Jenkins, Stan Uhm, and Talbot McInnis are Engineering students at University of Western Chris and Stan are graduating, Talbot has one more year Project generated interest from the media, investors, and entrepreneurs

Background
Golf is a growing form of recreation (2.5% annual growth) Approx. 21.5% of Canadians golf
Trio must decide on a course of action quickly to protect idea and to earn income

Key Issues
Technology
Need to develop prototype into marketable product

Expertise
Need to ensure expertise in start-up is in place

Risk
Level of acceptable risk for group

Key Issues
Value-chain proposition
Is the product viable and sustainable? Do consumers exist?

Start-up Capital
How much financing is required. Where will it be obtained?

Income
How long will the partners be without income? Will they need another job? How high is the potential income?

Key Issues
Importance Urgency

Low

High

Low

Value-Chain Proposition Start-up capital

Technology

High

Expertise Risk Income

Strengths
Award-winning engineering project
(Ontario and Canadian design competitions)

Interest from media, articles in 2 local newspapers, and interest from investors and entrepreneurs No product in the market that provides the same range of information as the Analyzer at an affordable price

Internal Analysis
Design Features: records time and position, displays measurements, affordable, portable, could be used with or without a ball

Images may not reflect actual product.

Weaknesses
Engineering students with no big capital to invest in a business Limited experience and connections Golf retail industry is highly seasonal Need to obtain patent for Canadian and U.S. jurisdictions Advanced features dependent on computer

Opportunities
Golf is a growing sport Large number of core golfers Baby boomers are primary market Leading sport brand for golf analyzer equipment Indoor golf training so that golf is no longer seasonal Flexible technology with potential for several uses based on software (ie. Simulator)

Threats
Idea could be copied before it is patent protected Better funded competitors Rapid technological advancement Similar technologies exist Patent litigation

Porters 5 Forces
MED HIGH
numerous competitors
cheap to develop new technology

many technologies already patented

offering wide variety of features and price points for the consumer

LOW
individual component parts are cheap

HIGH
many alternatives

and abundant

HIGH
several similar products exist

easily copied new technologies evolving

Estimated Golf Spending in Canada

2006 TOTAL
Fees/Membership Equipment Travel Apparel

1998
(estimated)

$13 Billion $7.25 B $2.25 B $1.73 B $1.62 B

$11.30 B $6.30 B $1.96 B $1.50 B $1.41 B

Source for Data: Ipsos Reid, The 2006 Golf Participation in Canada Report

Golf Spending on Equipment

In the USA, approx. 12.5% of all golf equipment and accessories is for training purposes.
That means in 1998, Canadians spent $240 Million on golf training equipment.

Proportion of Golf Dollar Spending in Canada

13% 13%

17%

15% 2%

57%

Green Fees

Travel

Apparel

Equipment/Accessories

Training Accessories

Competition Analysis

Alternatives
Try to develop and market the analyzer independently Accept offers like Jack Lowes to help grow a company License the analyzer technology to a firm like Sports Simulations Inc. and collect royalties only License the analyzer technology to a firm like Sports Simulations Inc. in exchange for working for them too

Do it independently
Pros Maintain control Largest share of profits Cons Very expensive Inexperienced Riskiest individual venture Need to raise capital No short-term income

Get partners
Pros Maintain most control Large share of profits Attain some expertise Cons Very expensive Inexperienced Risky venture Need to raise capital No short-term income

License analyzer only

Pros Maintain ownership of technology Minimal personal cost Experienced development team Financing is irrelevant Can work elsewhere to get guaranteed income Cons Give up control Income dependent on revenue Income timing relies on product reaching market

License analyzer & work

Pros Maintain ownership of technology No personal cost Experienced development team Guaranteed income Immediate income Financing is irrelevant Familiar with technology issues Help grow product Cons Give up control Work for somebody else Minimize maximum income potential Income dependent on long-term viability of company where technology resides Unknown scenarios for leaving the company

Criteria
Income
Timeliness and magnitude of compensation

Expertise
How much expertise is required or offered by alternative

Risk
How much risk must be shouldered by trio

Financing
How financially stable is the alternative

Technology
How familiar the alternative is with manufacturing and troubleshooting the technology

Decision Matrix
Criteria Weight Go it Alone 1 1 1 1 Find Partners 1 3 3 3 License Only 3 5 5 5 License & Work 3 5 4 5 Income Expertise Risk Financing 0.25 0.25 0.25 0.15

Technology
TOTAL

0.10
1.0

1
1.0

3
2.5

4
4.4

4
4.15

1 (unfavourable) to 5 (favourable)

Decision
License the technology to a firm such as Sports Simulation Inc. or others for royalty fees. Negotiate a 12 month contract with the company to work/develop final product or else seek employment elsewhere.

Implementation Plan
Date
June 03

Activity
Hire a lawyer. Incorporate numbered company. Sign shareholders agreement.

Responsible
Uhm, Jenkins, McInnis, Lawyer

Cash Flow
($5000)

June 03

Raise capital from family and friends.

Uhm, Jenkins, McInnis, Lawyer

Uhm, Jenkins, McInnis Uhm, Jenkins, McInnis Uhm, Jenkins, McInnis, Lawyer Uhm, Jenkins

$10,000

June 03

Write business plan and prepare a Pro Forma Statement Seek SBL from bank.

July 03

$50,000

July 03

Identify a patent lawyer. Start Patent application process for USA and Canada. Continue refining prototype for development of production specifications.

($20,000)

July 03

($5,000)

Implementation Plan
Date
July 03

Activity
Initiate formal bargaining process between company and Sports Simulation Inc. Conclude negotiations for patent licensing with Sports Simulation Inc. Enter employment negotiations for Uhm and Jenkins with Sports Simulation Inc. McInnis is back to school.

Responsible
Uhm, Jenkins, McInnis, Lawyer Uhm, Jenkins, McInnis, Lawyer Uhm, Jenkins

Cash Flow
($5000)

Aug 03 Aug 03 Sep 03 Sep 03

McInnis

Uhm and Jenkins start employment somewhere at Sports Simulation Inc. Final product to mass manufacture.

Uhm, Jenkins

Feb 03

Uhm, Jenkins

Implementation Plan
Sources of Financing
Family and Friends $10,000 SBL $50,000

Expenses
Legal Fees $30,000 Hardware/Software $5000 Salaries $25,000

Contingency Plan
If negotiations for employment are unsuccessful, Uhm and Jenkins will seek employment elsewhere If unable to license patent, sell patent entirely Failure to find an immediate firm to license the patent to, new companies will be approached

Conclusion
To minimize Risk and maximize potential Income and product Expertise, the product should be patented and licensed to a sports company familiar with the technology and the market. QUESTIONS?

Appendix

7 Ps of Marketing
Product Price Promotion Place Packaging Positioning People

American Golf Equipment Spending

Golf Equipment and Accessories
1992 2003 $2.9 Billion $9.6 Billion

Specialty and Training Equipment 1992 2002 $400 Million $1.7 Billion

Training Equipment Ratio

In 1992, 0.4 B / (0.4 B + 2.9 B) = 12.12%
In 2002/2003, 1.7 B / (1.7 B + 9.6 B) = 15.04% Average is 13.58%. Use 12.50% to be conservative.

Royalty Analysis

Breakeven Analysis

Depending on the proportion of Labor and General expenses that go directly into the pockets of the trio, they will need to sell between 3000 and 8000 units per year to earn $50,000 each.

Implied Value by Partner

Jack Lowes offer of $10,000 for 5% implies he thinks the company/idea is worth $200,000 currently. This does not cover the costs of patents. His initial services would be worth around $5000 but he wants 5%. This implies company/idea is worth $100,000 currently. His desire for 5% for raising funds is not contingent on the amount raised. Contribution to day-to-day operations for 15% is reasonable. However, is he the right person?