TRICKY BUSINESS 2

PROGRAMME 1: CYCLEPODS

The business

A Cyclepod is an eco-friendly bike storage device made from 12,500 recycled cans. It has space for eight bikes and enables cyclists to secure both bike frame and wheels – expensive items frequently targeted by thieves. The Cyclepod stores bikes in an upright position, which makes them visible to CCTV cameras and gives added security.

The entrepreneurs

James Steward did a three-year product design course at Nottingham Trent University. He designed the Cyclepod after his bike was stolen. His girlfriend Natalie Connell recognised its sales potential and they set up in business together. Their company is called Built from Scratch Designs England (South East) but is better known as Cyclepods. Start-up funding comprised £4,500 from the sale of Natalie's car and a government start-up loan of £17,500.

The business problem

After nine months' trading, the business has sold eight Cyclepods to large organisations. The innovative product is attracting great interest. Orders are rolling in but the company cannot meet the demand. It cannot finance bulk manufacture and, with no stock, has long lead-in and delivery times. Low volume manufacture also means low profit margins. The company is making a profit of 26%, or £795, per Cyclepod. This is not enough to pay the bills or wages and has led to the current cash flow crisis.

The business solution

James and Natalie act on John's advice and take the following action. They:

• update the business plan – potential investors require a current business plan
• find investors – the business needs a cash injection of around £200,000 to pay for full production, make bulk purchases and increase profits
• prove that James is a businessman as well as a designer – investors look for good communication, management, negotiation and presentation skills alongside confidence, energy and enthusiasm
• are proactive – searching out investors and taking advantage of enterprise showcase events
• get into full production – shopping around for the best manufacturer and buying in bulk
• continue marketing and public relations activities – ensuring that people know about Cyclepods and establishing a good reputation.

The outcomes

The business attracts investment capital of £230,000. It secures faster, cheaper and better quality goods by moving its manufacturing base from India to China. It boosts its profit margin to 76% and supplies goods on demand. It wins a prestigious national award and has a long-term business plan to guide developments.