The Feed Resource Recovery concept is simple; to provide supermarket and restaurants with an onsite waste processing system that converts previously discarded food waste into a source of renewable energy and organic fertilizer. Having a great idea is just the beginning, to take this to the market they will have many issues to overcome. Opportunities Issues Time is always an issue for new business, but in this industry it is a little more crucial because the industry is growing very fast.
Many competitors with similar ideas can appear with more money overnight so it’s possible other solutions could arise cheaper than R2.
There are a handful of new firms with anaerobic digestion technologies, but none of them target the same market with on-site products. Another issue is how long time will take the construction of the prototype. Entrepreneur Issues Shane seems honest and genuinely interested in doing the right thing but another issue is his network. The case says he has strong personal networking, but it shows us that he cannot be supported at this early stage, construct and test the prototype, of the business.
At least he could contact with Ryan Begin, the young engineer, but the problem is the same.
I think he could have planned better in this stage, because the nature of the industry being relatively new and that there are not people with that kind of experience and who have any prior knowledge. Before be contacted by Shane, Ryan was working in another industry. He has commitment to the project, but Shane needed a person with more experience. Resources Issues Shane’s biggest problem was in the meeting with investor’s. He could have been more convincing; he could be more prepared. For example a detailed financial plan would have been key to present in the meetings.
I think the nly way for Shane to convince investors is to produce a prototype. I think this is a requirement because Shane is not sure about his product. Other reason may be for the decision to give up part of the business to investors. Clients are important for the successful of the business. Contact with walmart was very important, but Shane could contact another client or market and next with more information for the investors. Now, Shane must fund money to construct the prototype (first), and next he must decide about how to accept the investor’s conditions or search for alternative financing sources.
Options to address the issues Why time is a problem for the early stage of the business? Because investors are eager and another product could appear on the market cheaper than R2. To address this issue Shane must be monitoring similar products, research about prototypes that could be developed in a short time. I think the problem of time can be resolved with more information about the design of the product. Developing a team is a key to any new project. Shane could contact another person who has more experience in this industry and take him on with the same conditions as Ryan.
I think finding more experience could ultimately lead to producing cheaper prototype than R2. There are many options to get the money, the case propose is to raise the money through family and friends. This is very risky, not only for the time but also the risk of the project. The life of these people could become very complicated, and they will need to keep the business arrangements strictly about business. The amount of money could be a problem if it’s not enough. Also, there are more alternatives for financing; for example, there are many centers of research and development with limited partnership.
One issue that Shane must take a look at is the contract, but this could be addressed with a good lawyer. This loan is for a short to medium time frame and the amount is not so much, however it is enough for the early stage. I think Shane’s idea could be implemented in other markets like the agricultural industry. They have a lot of cattle manure and corn. Shane could enter a contract with them about the financing then test in the fields and bring them a discount when the product was launched to market.
I think is more feasible to do business with farms at this stage, because most retail options do not invest in this kind of project stage as they have smaller margins. When analyzing the data sheets, the projections shows that flow cash positive will be in the third year and net earnings of 14% in the fourth year, however the Investors requirement is two years. But if the market is growing quickly, the return of investments could be reduced to least than two years and with that projection some angel investors could come in to support him.
Shane must decide about the status of ownership with the business, but if he can find another source of financing for this stage he must control the situation and close the contract with better conditions. Conclusion Shane has the opportunity to create a really good business, but he should be more prepared. He really needs to develop a good team, and then analyze a new design for the prototype. The only place he cannot save money is in the cost of the components. To found rise for this, he should search for organizations, Universities and angels investors, but must contact with good lawyer.
As write before, Shane should analyze to do business into another market, like farms. I think the payback for that market is less than 2 years, because the fertilizer that R2 will produce can be used for the farmer and the energy of course. Shane should look for new Clients, he must know about their operations, demonstrate to clients that R2 is not created for using in short time, instead it will be use for a long time that will be part of the business process and they will save money in their operations. The other benefit is the marketing advertisement, which the client can be used to show that is using a renewable energy.
The bottom line is that Shane should look for a good team, new market, and another source of financing, with better conditions than the investors mentioned in the case. As said by Jack Welch (2005); “Put the right people in place to drive the big aha forward, and continuously improve on your insights and execution. Now you’re playing the game to win”. The projections are very attractive for everyone, so he must move fast. One big risk is to give up part of the business to other people and this could potentially cause unwanted constrains and lead the company in a different direction.
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The Feed Resource Recovery. (2016, Dec 13). Retrieved from https://studymoose.com/the-feed-resource-recovery-essay