Hands2Go: Looking at the Numbers

According to Francine Glick, whose Livingston (N.J.)-based hand sanitizer company, Water Journey, LTD, is on pace to hit $40 M in sales in five years, a network of support is invaluable: “You’re running this race, and it’s not how fast you run or how hard you prepare. It’s all those people cheering you on.” Take a look at her recent pitch and see what you think.

Questions:

1. Ms. Glick indicated that she needed funding of $2 million for a facility, research and development, working capital and additional staff. Make a realistic journal entry that Water Journey would make to record this transaction, assuming that the venture capitalists are sold on this investment. Indicate what assumptions you made.

2. Ms. Glick indicated that the venture capitalists would receive an ROI of 40%. What amount would this be, based upon their $2M investment, for the first year? How is ROI calculated?

3. Summarize the positive points made during Ms. Glick’s brief video pitch. What did the article indicate was the most difficult problem that entrepreneurs face?

Sources:

MSNBC Video. Elevator Pitch: Hands2Go. October 26, 2011 (Retrievable online at http://www.msnbc.msn.com/id/21134540/vp/27265816#27265816)

Tossi, J. (2007). The Million-Dollar Club, Business Week, June 22 (Retrievable online at http://www.businessweek.com/smallbiz/content/jun2007/sb20070622_876606.htm?chan=search)

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Financial Crisis in Greece

While banks and European leaders hold abstract talks in foreign capitals about the impact of a potential Greek default on the euro and the world economy, something frighteningly concrete is under way in Greece: the dismantling of a middle-class welfare state in real time — with nothing to replace it.

Since 2010, the government has raised taxes and slashed pensions and state salaries across the board, in an effort to rein in the bloated public sector that today employs one in five Greeks. Last week, the government announced it would put 30,000 workers on reduced pay as a precursor to possible termination and would cut pensions again for nearly half a million public-sector retirees.

Questions:
1. The article mentions raising the value-added tax.  What is a value-added tax?  Does the U.S. have such a tax? Should they?  Discuss.

2. Ms. Firigou received a pay cut last year.  What percentage pay cut was it?

3. How does this financial crisis impact the U.S.?  What is at the heart of this crisis?

Source:

Donadio, R. (2011) Worried Greeks Fear Collapse of Middle Class Welfare State. The New York Times, September 24 (Retrievable online at http://www.nytimes.com/2011/09/25/world/europe/as-welfare-state-collapses-greeks-suffer-and-fear-future.html?pagewanted=1&_r=3&hp)

Have A New Idea? Maybe It’s Not That Weird for a Business Opportunity?

Hart Main, age 13,  developed a new product called ManCans, candles with scents made specifically for men who don’t really want to smell like freshly laundered towels or a dewy forest. Basically, a typical ManCans scent is smells more like a fresh new baseball glove. It all started when his sister, age 12, started selling candles to raise money for school. Main wasn’t crazy about the girly scents and joked that there ought to be candles for guys — guys who didn’t want their bedrooms to smell like lavender soap. His mom encouraged her son to try to make some candles with a masculine aroma. ManCans now offers eight scents so far: New York Style Pizza, Grandpa’s Pipe, Sawdust, Campfire, New Mitt, Fresh Cut Grass, Coffee and, of course, Bacon.

Questions:

1.  How much did Hart sell the original candles for? 

2.  By what percentage did he raise the price?

3.  Based on the total current orders, how much is Hart’s sales revenue?

4.  According to the article, pricing has been tricky to figure out. What information do you need to find out his breakeven point?

5.  ManCan’s has a charitable arm.  Explain what it is and how you think it should be accounted for.

Source:

Williams, G. (2011). ManCans’ Hart Main: A 13-Year Old Entrepeneur Invents Candles for Men, AOL Small Business, May 10 (Retrievable online at http://smallbusiness.aol.com/2011/05/10/mancans-hart-main-a-13-year-old-entrepreneur-invents-candles-f/)

Airlines Are Raising the Fees They Charge Travelers to Check Baggage

Both Delta Air Lines and Continental Airlines are raising their checked-baggage fees.  According to this article the winners may be package-delivery companies and airlines without such fees. Unfortunately, it is hard to verify the exact numbers through shipping companies, but officials from both Southwest Air Lines and JetBlue Air Lines admit that their lack of checked-baggage fees have bolstered their bottom lines. 

Questions:

1.  Look at Delta Air Line’s most recent 10-Q (http://www.sec.gov/Archives/edgar/data/27904/000095012309053249/g20908e10vq.htm)

Where do you think the checked luggage fees are reported in its financial statements?

2.  During the third quarter of 2009, Southwest Airlines reported $2,550 million in passenger revenues and JetBlue Airlines reported $764 million for the same period.  Assuming that their “no checked-bag fees” are responsible for the increased traffic gains reported in November (12% and 7%, respectively) and continue to attract travelers at the same rate throughout the fourth quarter, what additional revenue will the two companies achieve in the fourth quarter?

3.  Assuming that the average traveler checking bags pays a fee of $35, how many travelers on U.S. airlines paid for checked bags in the third quarter (see the total in the article)?

Sources:

Berr, Jonathan. (2010). “UPS, FedEx Win  When Airlines Charge to Check Bags,” Daily Finance (Retrievable online at http://www.dailyfinance.com/story/media/ups-fedex-win-when-airlines-charge-to-check-bags/19313593/?mod=mktw)

SEC. (2009). Delta Air Lines 10-Q for 3^rd quarter 2009. (Retrievable online at http://www.sec.gov/Archives/edgar/data/27904/000095012309053249/g20908e10vq.htm)