Pascal Press: Crowdfunding A New Coffee Revolution Harvard Case Solution & Analysis

Pascal Press: Crowdfunding A New Coffee Revolution Case Study Solution

Financial Analysis

By using the data given in the case, including profitability analysis and breakeven analysis etc.,a financial analysis could be conducted to evaluate the feasibility of business in terms of its fixed costs, variable costs and the breakeven point. Required tooling costs are considered to be the fixed costs for the business, and the cost per unit of $12.5 is considered to be the variable cost per unit for the project which could also be considered as the marginal cost per unit. The calculations are conducted at three different levels of fixed costs, including the minimum level of $55000, an average of $57500 and a high level of $60000. A selling price assuming a 10% profit margin over the total cost per unit at the lower level fixed cost is calculated to estimate the revenues. It is also suggested for product price as the price is calculated by using the lowest fixed cost level which is the maximum reasonable price that could be charged for the product.

Using the above data and assumptions, a profitability analysis for the project is given in the following table 1:

Table-1: Profitability Analysis

From the above table it could be seen that at the minimum level of fixed costs the project will generate a profit margin of 9% with a 3% profit margin at the highest fixed cost level. This implies that at the per unit price of $44; the project will be feasible at all levels of fixed costs.

Along with the profitability analysis, a demand and supply by analysing the current trends in the industry could also be conducted for evaluating the future of the nascent business. Although, the market for the coffee press already exists, including the French Presses, but there is still a large gap and a requirement of high-quality coffee while travelling to fulfil the gap, which shows a potential future demand and growth in the industry.

Alternatives:

Based on the above analysis, it is considered that the launch of the product tends to be feasible. Therefore, in order to continue to make this approach success, the alternative are as follows:

Loan:

In order to start a business or invest on existing product, a substantial amount is required which primarily involves the measure to secure the bank loan.

Pros:

• It significantly allows you with flexibility of payments in regular instalment,and provides with an opportunity to invest money as per your requirement.
• The bank loans are the cheapest options to borrow money as compared to overdrafts and credit cards.
• Bank loans are only concerned with the payment of the interest on the principal amount, regardless of the profit you get from your business.

Cons:

• Strict regulations, such as the requirement of assets to get the loan approved.
• Repayment burden might occur, so the borrowers of loan must follow the periodic payments.
• Due to the changes in the interest rates on the market, if your loan is based on variable interest rate then they might vary.

Crowdfunding:

Pros:

• It is a fast way for raising finance regardless of any up front fees.
• It is an improved way of testing the reaction of the public against the product, demonstrating a good idea of the product market.
• It gives a significant opportunity to turn the investors into your loyal consumer base through the process of financing.
• It serves as an alternative approach if you find difficulty in getting the bank loans.

Cons:

• It is a time consuming process, as it requires time to build the consumers’ interest before the product launches.
• Failure of projects might lead to the risk to the damaged business reputation.
• If the idea is left unprotected without patent or copyright, your idea could be stolen.

Partnership

Pros:

• Business partnerships significantly promote the start-up cost.
• It also equally shares the work and the responsibilities required to run the business.
• It assists in sharing of business expenses and risks.
• Complementary skills of the partner result in achieving improved financial outcomes.

Cons:

• Both the partners would have to share an equal amount of total profit gained.
• The control over the business operations is divided with sharing of decisions and opinion differences.
• Partnership might not turn beneficial for friends, restricting a better business deal.

Recommendation:

Based on the analysis and the proposed alternative solutions;the recommended option is crowdfunding,due to the reason that it provides significant ways to gain large number of customers as investors and investors as customers. It provides a wide-ranging spectrum of the customer’s views regarding the needs, demands and perception of customers towards the product,prior to its launch. It will significantly assist in raising the required funds for starting the business.

Conclusion:

Kalbfleisch was not able to raise the funds of $60,000 in order to make his own travel friendly coffee press, because of the fact that there isa high threat of competitive rivalry in the current coffee market place.Based on the analysis and the proposed alternative solutions, the recommended option to be followed is crowdfunding.It gives a massive opportunity to turn the investors into your loyal consumer base through the financing process.

Appendices

Appendix-1: SWOT Analysis

Appendix B – Alternatives

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