Entry into the market for the Kayak Butter product is crucial as it is important to enter with the optimized product and with the right messaging at the right time to the right people. For this purpose, it is highly important to understand the Six Forces Model (Byers, Dorf, & Nelson 2015), Common Strategies, Beta Test the product before commercial quantity production and determine the messaging and timing.
- Firm Rivalry: Firm rivalry is low as there are some similar products out in the market with similar level of quality, although very few which match the “full package” model for premium products outlined in the value proposition of this business plan.
- Threat of entry by new competitors: The threat of entry by new competitors overall is low to moderate, since the barrier to entry for effectively assembling the talent (youtube personalities, plus Instagram personalities, plus product development engineers) is fairly moderate. Such a comprehensive platform requires the ability to quickly reach a critical mass to allow for the greatest “exponential growth” ie desired viral marketing effect among the health and wellness community to materialize. New potential competitors entering to the market usually enter with simpler product offerings, and do not attempt to create what is essentially a marketplace of health and wellness information disseminated by youtube stars (or people Kayak Butter deems capable of being such “stars” after partnering with the brand) coupled into premium products all owned under one conglomerate, so in that regard Kayak Butter is not in the same league and has a moderate potential of threat.
- Threat of Substitute Products is moderate to high considering the fact that substitute products are being developed and offered at an increasing rate, particularly on Amazon, Whole Foods, and online premium health, wellness, and personal care stores. Again, the success of combating this depends on the ability of Kayak Butter to reach market eminence and gain enough loyal followers to powerfully self promote related brands and partners owned by Kayak Butter to keep consumers buying and consuming content all owned by Kayak Butter.
- Bargaining power of Customer is moderate as the buyers have a medium range of opportunities to buy premium products that also do follow up with educational and motivational content on their brand’s website or on their youtube and Instagram partners’ platforms of selection and depend on the few existing ones, hence companies like Kayak Butter have substantial bargaining power to appeal to its customers.
- Bargaining Power of Complementors: Kayak Butter also will sell individual parts and products featured in the bag such as the water purifier in case users want to buy it separately or as replacement. The bargaining power of complementors will be high since Kayak Butter in it’s well executed form, excels in self promoting via it’s network of youtube and Instagram coaches that have a deep report, trust, and loyalty from their followers.
- Bargaining Power of Suppliers is high as there are few companies who offer a similar product like Kayak Butter and a lot of consumers who are looking forward to purchasing it. This means Kayak Butter will also have the pricing power. Nonetheless, Kayak Butter is striving to provide a quality product and strong customer service, which can retain customers
- Household online buyers of premium health, wellness, and personal care products, 900.1 million
- Specialty Health and Wellness Stores: Whole Foods, Trader Joe’s, Lush, B2B at micro/local level via Amazon, Alibaba, and a Wholesale page on our ecommerce stores. 290 million
- Other Special Health and Wellness Facilities including Gyms, 1.04 million (NCES, 2015; Bureau of Labor Statistics, 2017) Total Kayak Butter market share (5% total market): 4.5 million
The opportunity at Kayak Butter Group, in essence, is in identifying talented individuals in the health and wellness industry, who can benefit from a platform that contracts them to produce high quality products and/or genuinely valuable YouTube and Instagram content that connects with people.
Youtube personalities will offer tutorial videos on how to use products, either as recipes or how-to videos focused on results and optimized for SEO keywords that data shows people are actually interested in. This means that is a brand under Kayak Butter develops a line of easy-to-prepare keto-friendly breakfasts, YouTube personalities partnered and tailor picked will perform a video series on keto lifestyle, highlighting how that product can fall into a daily routine. Complimentary, an Instagram personality will add a dimension to the experience of using the product by posting interesting and beautiful value-packed pictures and stories of creative ways they are fitting that product into their healthy lifestyle and enjoying doing so.
All in all, customers receive the full package in every product they buy. Important to this framework for the value proposition and business model is to make sure that people are effectively funneled to the appropriate Kayak Butter social media partners, to optimize promotion and to grow the Kayak Butter community and brands strategically. A qualitative goal that, if achieved, contributes massively to the success of this business model, is if a critical mass of followers and brand loyalty is obtained to graduate the Kayak Butter social media network of personalities into a reputable and sought after platform, with a reputation that attracts more talent. Such a dynamic would contribute to an increasing rate of growth which allows principles ad classical mathematics governing viral and exponential growth seen in highly popular, i.e. famous brands and accounts on YouTube, Instagram, and other platforms.
Legal & Regulatory
Fortunately, most products in the health and wellness industry, particularly those that customers prefer in the premium niche tier, are actually not regulated by the FDA. If a product may fall under regulations by the FDA, it is important to use proper labeling and compliance with information readily available by the us government website for FDA regulations. In these cases, and in general during an initial product development and launch, this is something that must be carefully taken into consideration during the product development cycle of each new products. Costs to have products evaluated and approved by the FDA in cases that this is required in the health and wellness industry typically fall between $5,000 to $25,000 per product. Though in most cases developing such a product can be avoided in favor of using a natural-ingredient approach and clever marketing that caters towards the educated buyer.
Based on the size of the market and the defined market areas, the sales projections show that the break even point will be reached within year two. The projected profits for year three, four and five are projected to grow exponentially due primarily due to networking effects. Economies of scale play a minor, yet still appreciable role in producing the distinctively parabolic curve as well.
Harvest: Growing profits will be expected in year three and investors can expect profitable repays by then. Kayak Butter will allow for an Initial Public Offering (IOP) by year four, which will result in increased value of company shares.
The Kayak Butter Backpack Company has prepared the following Financial Statements for a three year projected period. These Financial Statements are: Forecasted Income Statement (Cash Flow), Break-even Analysis, and Sensitivity Analysis (Gregory, 2016).
Table 1 Estimated Income Statement between May 2018 and April 2021
Table 2 Forecasted Sales
The company is forecasting sales of 348 units below its break-even point in year one, 40 units below break-even in year two and 167 units above break-even in year three.
As can be seen from the financial statements, our company requires $111,700 to start the business, which include the cost for first year fixed costs plus purchasing 300 units of Kayak Butter pack from the manufacturer. The Five owners will invest $30,000 at $5,000 each. $50,000 will be a bank loan from a commercial Bank, and the remaining $31,700 from outside investors. Payment on the $50,000 will be made monthly and amount of $900 per month (5-year period).
The Breakeven point in the first year of operation is 498 units. The financial projections anticipate breakeven point will remain overall consistent. Forecasted Income Analysis shows that our company will have a net loss of $43,901 at the end of its first year. And will have a net loss of $3,746 by the end of its second year. The earnings projections for the third year are expected to be $16,378. Last but not least is that the Forecast Sensitivity Analysis shows that the actual number of units sold will have a significant impact on the revenue.
Uncertainties and Risks
There are some uncertainties and risks involved in producing and selling Kayak Butter in the marketplace. Since Kayak Butter is a “health food related product” some consumers will not consider buying it until they are impacted by a health emergency, which creates a high uncertainty. Even if some might decide to buy such a health product this customer might prefer another product in the marketplace due to various preferences. These reasons should be analyzed and market surveys should be implemented in order to at least convert customers to Kayak Butter. Similarly, the sales trends will be intermittent, which is an uncertainty on the production side. If the customers are willing to purchase the product after such diseases, sales cannot be forecasted from before. On the other hand, it is also hard to predict sales for different locations apart. Kayak Butter can start selling the innovative health products in the high-risk area stores. Once the company can attain the breakeven point, then the founders can start working on the expansion strategies. This product is an “essential need” required by the customers. Keeping its price very high will deter customers from buying the product. Another risk is that compared to other products’ features of Kayak Butter mainly aim to fulfill the micro-nutrient needs of the customers. While this is a very important need by the survivors, the reaction of the early adopters is uncertain and also the entry to market with such a purpose is a risk that might result with targeting a very niche need or being unsuccessful.