Rug Bug Corporation
Case 3C
RUG BUG CORPORATION
A. L. Young has come a long way with his latest invention, the Rug Bug, a motorized wheelchair made especially for children. His lightweight, relatively inexpensive model has no direct competition in a field dominated by companies that produce scaled-down versions of adult models that are inappropriate to the needs of children. A working prototype has been built, office space and manufacturing capacity contracted, and an initial sales force recruited. The only element Young lacks is enough capital to produce the first 200 units. A business plan has been drawn up describing the product, its manufacture, and the marketing plan. After several fruitless months seeking financing, Young was contacted by a group of investors who had seen a summary of his proposal. Feeling that this might be his only chance, Young has contacted you for advice on how to present his plan. He has sent you the following copy of his business plan and a list of questions. What recommendations would you make? Young 's questions: 1. I 'm not much of a writer: Do you think my descriptions of the product, competition, marketing, and so forth, are adequate? Could it be improved easily without additional outside information (my meeting is in two days!)? The pro forma income and cash flow statements were developed from a model I found in a book. Did I leave anything out? I think $150,000 is a good amount to ask for-big enough to show we are serious about creating a growing business but not large enough to scare them away. Are they going to want to know what I plan to do with every penny? What should I do if they are only willing to invest less? I really don 't know what to expect from these investors. I have my own idea of how much of the company I want to give up for the $150,000, but I don 't know what they would consider reasonable. Can you give me any suggestions? Mr. and Mrs. A. L. Young established the Rug Bug Corporation as a Delaware corporation. The sole purpose
RUG BUG CORPORATION
A. L. Young has come a long way with his latest invention, the Rug Bug, a motorized wheelchair made especially for children. His lightweight, relatively inexpensive model has no direct competition in a field dominated by companies that produce scaled-down versions of adult models that are inappropriate to the needs of children. A working prototype has been built, office space and manufacturing capacity contracted, and an initial sales force recruited. The only element Young lacks is enough capital to produce the first 200 units. A business plan has been drawn up describing the product, its manufacture, and the marketing plan. After several fruitless months seeking financing, Young was contacted by a group of investors who had seen a summary of his proposal. Feeling that this might be his only chance, Young has contacted you for advice on how to present his plan. He has sent you the following copy of his business plan and a list of questions. What recommendations would you make? Young 's questions: 1. I 'm not much of a writer: Do you think my descriptions of the product, competition, marketing, and so forth, are adequate? Could it be improved easily without additional outside information (my meeting is in two days!)? The pro forma income and cash flow statements were developed from a model I found in a book. Did I leave anything out? I think $150,000 is a good amount to ask for-big enough to show we are serious about creating a growing business but not large enough to scare them away. Are they going to want to know what I plan to do with every penny? What should I do if they are only willing to invest less? I really don 't know what to expect from these investors. I have my own idea of how much of the company I want to give up for the $150,000, but I don 't know what they would consider reasonable. Can you give me any suggestions? Mr. and Mrs. A. L. Young established the Rug Bug Corporation as a Delaware corporation. The sole purpose