Flush…More or Less will be sold at very reasonable prices. The purpose of this
pricing technique is to show that it is possible to help the environment with small
contributions being made by a variety of people. At the price of $14.99, we firmly
believe that many people will be interested in purchasing the product. This belief is
confirmed in the survey; over half of the people surveyed said they would pay between eleven and twenty dollars for such a device. The market research performed was on people who had not been fully educated as to the benefits of the dual-flush system. It is our assumption that, with proper promotion of the product and of its benefits to the environment, more people will be willing to pay the retail price. Customers can easily identify with this idea as it deals with toilets and most households possess at least one toilet. With this common connection, people will not be afraid to purchase the dual-flush; the low price adds to that effect.
Additionally, many people pay water bills based on consumption. Toilets
contribute to approximately thirty percent of the total volume of household water
consumed. Flush…more or less saves about sixty-five percent of water for every mini-flush, which is estimated to occur sixty percent of the time. With those conservative assumptions, well over eleven percent will be saved on total household water
consumption. When observing those facts, the cost of purchasing the Flush…more or
less device will seem insignificant compared to the future financial savings of lower
water consumption.
Since demand for the product is expected to exceed supply in the first year, sales
are based directly on production capacity. Witloo will focus on increasing the production rate during the first year. The assumption is made that the venture will begin with a four person production crew that initially produces at the rate of 8 products per hour (or 56 products per day, assuming a 7 hour work day). Production will take place three days a week to ensure cohesiveness with a three day-a-week
delivery schedule. The production rate increases as the months pass and more
efficient assembling techniques are implemented. It is expected that in month 10
(October), another production employee will be hired to help increase the production rate. Monthly sales are based on the fact that Flush…more or less will be sold wholesale at a price of $11 each. The suggested retail price will be $14.99.
The purchase of materials and packaging associated with production of the product amount to between 40% and 57% of sales during the first fiscal year. The goal at the year end is to keep a steady gross margin of 60% (purchases being at 40% of sales). This will ensure high profitability and cash generation. Purchase materials required for multi-product production would be; aluminum angle bars, screws, nuts, toilet levers, epoxy, flapper valves, ball chains, foam floats, fastening clips, and light metal hooks. Once assembled, products will be fastened in cardboard boxes with user-instructions (on
paper) included.
Other general expenses amount to between $7,300 and $7,900 per month. Most
of these costs remain fairly fixed, again indicating that a higher production rate, which is the goal, will yield a greater profit. Costs under general expenses relating to shipping (gas and other minor travel expenses) are included under “Delivery expenses? The geographical range of travelling will remain in southern Ontario for the first year of operations.
The net income for the year is estimated at $5,493. This is a very realistic target,
especially as production rate increases.
