Saturday, October 27, 2012

Omega Hovercraft.

Omega Hovercraft is a business that my friends and I sought to form for much of last year. Though the business ultimately failed due to time constraints, this pursuit represents my entrepreneurial nature and my ability to learn from my failures. Below are instructions for the construction of our hovercraft (which I received from a friend, and then perfected through extensive experimentation) as well as my business plan and related owners' terms, which I will allow to explain the business. The blanks in my business plan refer to an acquaintance of mine, who for some time was a candidate for our CFO. The blanks in the Owners' Terms refer to this candidate as well as our potential investor. Also, note that when I wrote this business plan, we were in the investment acquisition stage and I have not updated it to reflect the business's failure. Finally, though this business failed, I quickly recovered and established a new business, Premium Private Tutors, which is registered with the state and country and currently employs six other individuals. For an explanation of Premium Private Tutors, please visit my website at premiumprivatetutors.com.


Hovercraft Instructions

Read this first before you start, then again as you are going through.
For starters, you’ll need to gather up your ‘ingredients’. For the leaf blower, gas or electric doesn't really matter, though obviously a gas one is preferred because it’s 1) stronger and 2) cordless – you can take it anywhere. A 25cc 2-stroke, probably the smallest they have  works great. A 25cc engine is enough at full throttle to pick up 250 pounds (or 3 kids at the same time)!

Anyway, ingredients list:
1. Leaf Blower
2. 6’ X 9’ Ground Tarp
3. Finished 4’ X 4’ x .5” Wood Square
4. 90° PVC Pipe Elbow (depending on the size of your leaf blower outlet, you’ll want to use either a 2.5” or 3” diameter)
5. Toilet ‘Flange’ (this is what you screw into the underside of the wood, and sticks up, and is what the 90° elbow attaches to)
6.10’ of  Either Metal or Plastic Hanger Tape
7. Bike Tire Tubes
8. A Seat of Some Type
9. PVC cement
10. 10 1” wood screws
11. 15 .5” wood screws
12. Duct Tape

These are the tools you’ll need:
12.  Staple gun with about 200
13. Sandpaper (or a Router doesn't hurt)
14. Couple of pens – ball point pen and a sharpie
15. Scissors
16. Measuring tape
17. Jigsaw
18. 3” Diameter Circular Drill Bit
19. Drill
20. Spray Paint (optional)

Step 1: drawing a 4 foot diameter circle on the wood
The easiest way to make the circle is to find the exact center of the 4x4 sheet of wood, and draw a circle. To find the middle, take the tape measure, and hold it on one corner of the wood, then stretch it to the opposite corner, and then draw a line along the tape measure, then move the tape measure to the other corner, stretch it to the opposite corner, and mark another line intersecting with your first line. Presto! You've found the center.
NOTE: This way is preferred over just measuring out 24” inches from each side, because the wood may not be cut exactly at 48” x 48”.
Once you know where the center is, it’s time to make your compass. Cut two feet of hanger tape, put ball point pen through one hole, and have someone hold the other hole on the ‘X’ you marked at the center of the wood. Stretch the hanger tape to one edge of the wood. Move the hanger tape to each of the other 3 sides, and see if they are all the same. If for some reason they aren't, find the shortest side and start there.
Take the sharpie, and put it through one end hole of the hanger tape. Then, put the pen through the other end hole on the center X. Make sure the hanger tape is stretched taut, so you can draw a really good circle. Once the hanger tape is “penned” to the center X, slowly drag the sharpie around the wood, until you've drawn a complete circle.

Step 2 – cutting the circle
Now that you have this awesome perfect circle drawn on the wood, it’s time to cut it out. Use a Jig-saw to cut out the circle. It’s easiest if you have another person help you hold it steady. You’ll want to keep the pieces that you cut off for step 3. When the 4 corners are cut off and you have just the 4’ circle, if you have a router, route the edge both top and bottom, then use sandpaper and smooth it down even more. This is so that the tarp won’t rip if it rubs up against it. If you don’t have a router handy you can just sand down the edges.

Step 3 – cutting the mini-circle
Take one piece of the corner of the wood that you cut-off, and make a 12” diameter circle. It doesn't need to be exact, whatever you can get out of one of the corner pieces that was leftover. Once you've cut out the circle, use sandpaper on the edges, or the router.

Step 4 – cutting out a circle from the tarp
Spread out your tarp, and place your 4’ plywood circle on it. You will want to make sure that you have about 12” of tarp extending out from any part of the plywood circle. Cut 3’ of hanger tape, and put the ball point pen through one end out on the center of the wood circle. Measure out 12” past the edge of the wood, and put your sharpie there through the other end hole. IMPORTANT: Take a ¼” drill bit and drill through the exact middle of the plywood circle, and down through the tarp as well. If you are drilling outside, you’ll know you've drilled through the tarp because you’ll start drilling into the concrete. It’s easier if someone is standing on the wood circle to help you (and to hold the pen while you draw the circle, and turning it so the hanger tape doesn't wrap around the pen) Draw a circle on the tarp, the whole way around. Grab a pair of scissors and cut out your 6’ diameter tarp circle. Set the tarp circle aside for now.

Step 5 – cutting a hole for the inlet air, and installing the toilet flange
Take the toilet flange and hold it up to the plywood circle, and draw a circle that you will cut out so that the flange can go through. Put the hole about ¾ of the way between the center and the edge of the circle (so about 18” center of the 4’ plywood to center of the flange hole). Drill the hole using the 3” circular drill bit. Once the circle is cut out, make sure the toilet flange fits in okay. Use the .5” wood screws to attach the flange to the wood. NOTE: the side that the flange mounts to is the BOTTOM of the hovercraft.

Step 6: attaching the ‘bumpers’
Take your bicycle tire tubes, and cut it on each side of the stem and throw the stem away (unless you want to keep it for any reason). Take your scissors and cut the tube lengthwise the entire way so that it’s no longer a tube. This will be stapled along the outside of your wood circle (helps keep the tarp from getting holes in it when you run into stuff). The tube should fit pretty well on the edge. Put staples in the top and bottom sides every 4” or so. You’ll probably need 2 or 3 tubes to make it all the way around the circumference of the wood circle.

Step 7: attaching the tarp/skirt to the bottom of the hovercraft
Place the wood circle on the ground, with the top facing down. Place your tarp on top, and line up the center hole you drilled through the tarp with the center hold drilled through the plywood. Next, take your 12” diameter wood circle that you cut out, and place it on top of the tarp, over the center of the tarp, and use the 1” wood screws to screw the small plywood circle into the 4’ diameter circle. The small circle doesn't need to be exactly in the middle of the circle, approximate is fine. You can use 10 or so screws, you just want to make sure it’s secure.

Step 8: attaching the skirt to the outer perimeter of the hovercraft
This is the step that takes a bit of time, like 30 minutes or so. Pick up the wood, and set the tarp side on the ground, wood on top. Once again, this time using 1’8” of hanger tape, draw a circle from the center of the wood circle to 4” from the edge of the wood circle, all the way around. This will be where you fold the tarp up to, but not over. Start on one edge, and fold a section of tarp over the edge, and up to the line you just drew. Put a staple in the tarp, about ½ an inch from the edge of the tarp. Now go the opposite side of the plywood circle, and do the same thing. Move over 90 degrees, and put one there, then one immediately across the circle from that. Keep doing this back and forth, around the whole perimeter of the circle, until your staples are about 3” apart from each other, the whole way around. Now comes the fun part. You’ll see that you even though you have staples every 3”, you have a bunch more material in between every two staples. You need to take that tarp material, and fold it on top of each other, so that it overlaps. Make sure you get it real tight, then put a staple or two through the folds. Do this for every ‘loop’ of tarp material the whole way around. When you finish up, you should have a circle of staples holding the tarp to the wood, with no more than 1” between any one staple – you need to be able to hold in the air.

Step 9: cutting out the outlet holes
Flip the hovercraft back upside down. Start drawing circles about the size of a quarter (and you can use a quarter if you want) around your 12” diameter wood circle. Make sure that no circles are within 4” of the wood circle. Start out cutting 8 holes. You’ll need to fine-tune your outlet holes, you may need more or less, depending on several factors, like the size of the leaf blower, average weight of the rider, etc. You’ll probably need to cut out more, but start with this at any rate. Leave a good 2” of material between each hole too, you don’t want it ripping and making a really big hole – this is bad.

Step 10: modifying and installing the leaf blower onto the hovercraft
This is going to depend entirely on the model of leaf blower that you have. I cut my leaf blower tube to an suitable length (it just needs to fit on the hovercraft) at an even part of the tube, then I took some PVC glue, and glued on the 90 degree elbow to the leaf blower tube. Finally I PVC glued the other end of the elbow to the toilet flange sticking out from the bottom of the hovercraft. Assuming that you are going to be sitting in the dead center of the hovercraft (CG – center of gravity, is super important), you will want to make sure that you can work the throttle on the leaf blower, however you position it. Try and make sure that the exhaust/muffler is pointing away from you, so you don’t burn yourself (and it’s a little more quiet). Now, use hanger tape to secure the leaf blower firmly onto the hovercraft by drilling the .5” screws into the hanger tape holes.

Step 11: attaching the seat
This part may differ depending on the seat, but drilling the .5” screws into hanger tape holes, with the hanger tape securing the seat should work.

Step 12: fine tuning
Power up the leaf blower  and you’ll watch the skirt inflate. You may want to have on ear protection and probably eye protection, because it’ll blow up a bit of dust. If the skirt inflates fine, go ahead and step onto it and sit in the middle. The hovercraft will lean to one side if you aren't sitting exact middle, so adjust yourself accordingly. If it settles back down to the ground, go ahead and throw on some throttle and see if it rises up. You should be able to have someone spin you around in circles without much difficulty. If it seems to be sticking and not spinning, you’ll need to cut some more holes out. 

Omega Hovercraft Business Plan

Introduction: Omega Hovercraft is located at 4548 Mahogany Lane, Copper Canyon, Texas and is a general partnership. Omega Hovercraft is currently owned by Nicholas Chase (CEO), Cannon Law (COO) and, ____ (CFO). Throughout this plan, the words ‘hovercraft’ and ‘hovercrafts’ can both be considered to be plural.

Product: The products to be sold by Omega Hovercraft are hovercraft for recreational use in the outdoors on a variety of surfaces, but primarily on cement. The hovercraft produced by Omega Hovercraft consist of a leaf blower for lift, a platform (wood) on which the passenger and leaf blower are located, and a skirt attached to the bottom of the platform to contain the air cushion beneath the platform. Omega Hovercraft will make multiple hovercraft models varying in shape, size, passenger capacity, lift source, surface range, and means of lateral propulsion. The hovercraft produced by Omega Hovercraft differ from typical hovercraft, which are primarily used on bodies of water by adults comparably to boats, in that Omega hovercraft models will be used by children around their houses much in the way tricycles or bicycles would be used.  Here is a picture of the original hovercraft, based on the “Nab” design. It has a circular, four foot in diameter, half inch thick birch wood platform. It is powered by a 25cc leaf blower which puts out air contained by a standard tarp stapled to the platform. This model has a passenger capacity of approximately 250 pounds.
The products to be sold by Omega Hovercraft are public domain, meaning that at this point it would be far too difficult to secure patents which could take up to ten years and several hundred dollars. Since in the foreseeable future Omega Hovercraft will operate primarily in the Highland Village/Flower Mound/Lewisville area, it is very unlikely that the business will ever encounter any issues regarding possible patent owners of our designs. Additionally, we will stamp our products’ names with the trademark sign () which does not require any legal action, however, any potential investor without knowledge on the matter should hesitate to copy our products.

Brief History: Nicholas Chase was originally presented the idea of a recreational hovercraft business by his close friend, Brent Woodland, in the summer of 2011. Mr. Woodland knew a member of his and Mr. Chase’s church who built cheap, simple hovercraft for fun. Mr. Woodland and Mr. Chase obtained instructions from the church member, Mike Nab with the goal of making a few to bring to children’s birthday parties for amusement. The next six months or so moved slowly as Mr. Woodland and Mr. Chase were fairly poor and busy teenagers. By the end of this period, Mr. Woodland had spent a total of $80 on parts for the first craft which was approximately halfway complete. It occurred to Mr. Chase that Mr. Woodland was not very reliable (he had canceled many planned meetings) and would be leaving for college within another six months. So, Mr. Chase and his friend, Cannon Law bought Mr. Woodland out for $90, each paying $45 for 50% stake. Within a few months and about $50 later, the first hovercraft was finally complete. Around this time, Mr. Chase and Mr. Law decided it would be more practical to sell the hovercraft via a website instead of renting them out at parties. By early July, Omega Hovercraft presented its business plan to Mr. Chase’s uncle, Bryon Chase. Bryon Chase orally agreed to provide an investment of “a few hundred dollars a month” for stake in the company. However, final contracts were never signed and the investment fell through. Bryon Chase did, however, donate $150 to Omega Hovercraft which was used to complete and perfect the first prototype. The business is currently in the investment acquisition stage.

Market: Omega Hovercraft’s market includes middle class, suburban families with children; living in the Highland Village, Lewisville, and Flower Mound area. Omega Hovercraft will market primarily to children, whose interests often determine their parents’ purchases. Omega Hovercraft will market its products as an alternative to recreational products such as bicycles. The loose age range within which Omega Hovercraft’s target market will be is between four and fifteen.

Competition: There is not any local recreational hovercraft competition. However, Omega Hovercraft’s competition will be local bicycle stores such as Walmart and Bicycles Plus. Additionally, there will be competition with the market’s tendency to not purchase hovercraft at all.

Business Plan: Sometime in the second half of August, Omega Hovercraft will begin meeting with potential investors. Omega Hovercraft will seek an investment of $5,000 in return for a 25% stake in the company. This will leave %30 for Mr. Chase (who will act as CEO), 30% for Mr. Law (who will act as COO) and 15% for Mr. ____(who will act as CFO). The owners’ terms are attached. Every step and decision from this point forward will be accompanied by discussion followed by a vote if necessary. Furthermore, regular board meetings will be held to discuss the company. Approximately $2,000 of the investment will be spent on developing various hovercraft products by experimenting with multiple, different, larger, etc. hovercraft engines and designs. Goals for this stage include achieving flight on different surfaces (such as on grass and water), presenting products in a “large company” manner, increasing weight limits, and creating hovercraft of different sizes and shapes. After this product development stage is complete, there will be a demonstration of the resultant hovercraft designs followed by a vote on which product(s) to sell. At this point, Omega Hovercraft will establish a means for shipping its hovercraft. At the beginning, this will likely be done locally. Expansion will be addressed once appropriate growth has been achieved. Then, taking all expenses into consideration, Omega Hovercraft will decide on a price for each product. Next, Omega Hovercraft will create logo(s), a website, and various means of advertising; all of these will likely be outsourced to other companies, except perhaps the website creation which Mr. Chase has some level of experience in. This stage is one which should be considered to be of the utmost importance because success depends heavily on Omega Hovercraft’s ability to connect with its market. At this point, Omega Hovercraft will begin sales through its website. As Omega Hovercraft acquires profits, it will gradually rent a facility, amass an inventory, hire a staff, and grow its business. In the beginning, it will construct hovercraft as it receives orders. Later, it will have an inventory of hovercraft ready before it receives orders for them. The final planned stage for Omega Hovercraft’s development is the process of making Omega Hovercraft somewhat self-sustaining. This stage must be completed by fall 2013 because that is when Mr. Law and Mr. Chase intend to begin their freshmen years at BYU and MIT, respectively. Mr. Law and Mr. Chase will be able to maintain upper-level management responsibilities long-distance via internet and other communication channels but lower-level managers will need to be hired to directly oversee business operations. Once employees are hired, additional legal steps will probably have to be taken which will be considered when appropriate. Also, we should definitely hire payroll services because issues that can result from messing up payroll can be the quickest end of a business.

Method of Investment Payment: Once an investment is acquired, Mr. Chase will open up a business account at Bank of America. The investment checks or cash can be deposited into that account and the funds can be spent using a debit card linked to that account. The account will require a $25 minimum deposit but the usual $16/month fee can be avoided if a monthly debit card transaction is made at a retail store and if we go paperless.

Legal Steps: Every owner in Omega Hovercraft will need to sign an assumed named form (which Mr. Chase is in possession of) in front of a notary witness (at a bank, for free), Omega Hovercraft will have to register for a sales tax permit (which can be done online), and will have to purchase high coverage product liability insurance to protect against sue. Also, each owner will have to fill out an IRS form to include his income from Omega Hovercraft with the rest of his taxable income. Since Omega Hovercraft is simply a general partnership, no other significant legal measures will have to be taken to make Omega Hovercraft operational.

Investment Allocations:
Allocation
Amount
Product Development
$2,000
Logo(s) and Website
$300
Liability Insurance
$300/month for first two months
Initial Marketing
$1,100
First Sales
$1,000
Product Development: This $2,000 will be spent on new skirt materials, different leaf blowers, larger platforms of different shapes and materials, and the tools necessary for construction of new designs.                                                                                                                        
Logo(s) and Website: The website and logo(s) will be created by Mr. Chase and/or a separate company. The website and logo(s) must be comparable to the websites and logos of large companies because that is what will earn our consumers trust.
Liability Insurance: Omega Hovercraft’s products will require protection from sue in the form of product liability insurance. We will obtain this insurance from a free insurance agent who can draw from any carrier to give us the best plan with the most coverage for our products. As additional protection, we will have warning labels on our products. After the first two months, company income will begin to pay the liability insurance premium.
Initial Marketing: Our early marketing strategy includes use of brochures and posters at large local gatherings such as at school football games. Flyers can be placed under windshield wipers to ensure they are seen.
First Sales: This is just to buy the materials necessary for our first orders.
Note: if any of these tasks are completed with less money than has been allocated for them, the leftover money should be used of additional marketing and/or product development as well as for general business activities.

Financials:
Assets
Source
Item
Value
Brent Woodland
4' wood platform, 25cc leaf blower, 6'X8' tarp, 3" closet flange
$90.00
Lowe's
16 1" screws, 10 5/8" screws
    ~$8.00
Lowe's
4oz PVC cement
$5.39
Lowe's
1 gallon gas can
$12.97
Racetrac
1 gallon gas
$3.32
Lowe's
25' plastic hanger tape
$2.98
Lowe's
3" circle drill bit
$21.62
Bryon Chase
Donation
$150
Walmart
Razor Tricycle
$106.09
Lowe's
8'X10' tarp
$15.67
Lowe's
2 5/8"X2" Hex bolts
$1.88
Lowe's
1250 1/2" Staples
$3.49
Total
$413.41

Projected Schedule:
Date
Event
Late August 2012
Secure an Investment
Early September 2012
Begin Secondary Product Development
Mid-Late September 2012
Hold Product Demonstration and Vote
Late September 2012
Coordinate Shipping and Pricing
Early October 2012
Begin Gradual Business Growth
Early June 2013
Begin Making Omega Hovercraft Self-Sustaining
Early August 2013
Omega Hovercraft is Self-Sustaining

Projected Income:
Month
Income
October 2012
$1,000
November 2012
$2,000
December 2012
$4,000
January 2013
$3,500
February 2013
$4,500
March 2013
$6,000
April 2013
$8,000
May 2013
$9,000
June 2013
$10,500
July 2013
$11,000
August 2013
$11,000
Total
$70,500
Note: These are estimates based on a $500 product and the market research (though minimal), which Mr. Chase has conducted. If Omega Hovercraft effectively markets its products in such a way that evokes local discussion of these products while creating a chain reaction instigated by outstanding customer service, achieving these projections should be well within Omega Hovercraft’s reach.

Potential Challenges: The most likely challenges that may be faced by Omega Hovercraft include failure to effectively inform consumers, which will be combated by extensive marketing from word of mouth to established means of advertising; failure to present products in a “large company” manner, which will be combated during the product development stage; and failure to produce consistently high quality products, which will also be combated during the product development stage. Additionally, it is crucial that we develop excellent relationships with our customers, which we’ll do by meeting every reasonable request our customers make.

Conclusion: What makes this product different is that the primary hovercrafts available on the market today cost several thousand dollars and are used primarily in bodies of water for activities such as fishing. We will bring hovercraft into the home, with recreation in mind. Our hovercraft can be piloted by children and will be available for only a few hundred dollars. In short, we are putting hovercraft ownership within the reach of just about anyone. What will be key to our success will be the elevation of our products’ appearance above that of stereotypical small businesses’ products, which will gain our consumers’ trust as a company. Additionally, informing potential consumers is crucial and should be considered as such. Thank you.


Omega Hovercraft Owners’ Terms
  1.         _____ will invest $5,000 in Omega Hovercraft at a rate of $1,000 per week for five weeks. The first payment will begin within 24 hours of the signing of the contract.
  2.             In return for his investment, _____ will receive one-fourth ownership in the company Omega Hovercraft. This will leave Cannon Law and Nicholas Chase with 30% ownership each and ____ with 15% ownership. Voting power on all decisions will be based on ownership.
  3.         Nicholas Chase will operate as owner and chief executive officer (CEO) of Omega Hovercraft , _______ will operate as chief financial officer (CFO) of Omega Hovercraft, and Cannon Law will operate as chief operations officer (COO) of Omega Hovercraft. Every owner, including ___ will sit on the company board. The responsibilities of each owner will be as their titles imply and/or as delegated by Nicholas Chase as CEO.
  4.       If any individual does not contribute a sufficient amount of time, effort, and/or funding in return for his ownership; the other owners have the ability to relieve him of his ownership. If the apathetic owner did not do anything “wrong” (as determined by the remaining owners), then he will be paid for his ownership’s worth. If he did do something “wrong”, he forfeits his ownership without compensation. The relieved ownership as well as the compensation expenses will be divided equally among the remaining owners.
  5.             When Omega Hovercraft begins to obtain income that exceeds expenses, the owners will determine what percentage of the profits should be allocated for owners’s salaries. The profits allocated for owners’ salaries will be divided according to ownership. For example, if $100 is allocated for salaries, each owner will receive $33.33, if each owner has maintained his original one-third ownership. Obviously, the profit not allocated for owners’ salaries will be allocated for business operations.
  6.        If Omega Hovercraft is sold, the earnings of that transaction will also be divided according to ownership.
  7.          If one owner wishes to leave Omega Hovercraft (or to just sell a portion of his ownership), he must first offer to sell his ownership to the remaining owners. If the remaining owners do not wish to purchase his ownership, he must sell it to a third party who is approved by the remaining owners.


X___________________________________
    Nicholas Chase, CEO

X___________________________________
    _____, CFO

X___________________________________
    Cannon Law, COO
X___________________________________
    _______


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