Ruth M. Owades

Ruth Owades was the Director of Marketing at Avion Group, which was a diversified mail order retail

company. After working for few years at Avion, she saw an opportunity in selling exotic gardening

equipment and recommended gardening catalog to the management. The management decided not to

invest in the opportunity, primarily due to lack of consensus among the key management. Ruth believed

that the opportunity was great and decided to pursue it on her own. Based on her research she would need

at least $250,000 for the venture. She managed to raise the $150,000 from private investors in addition to

$50,000 of her own funds.

Opportunity

The opportunity looks attractive because of the following reasons:

The new venture is targeting a niche market that has not been addressed by any others in the

market.

The target segment includes gardeners who have the buying power, interest to show off their

gardens and history of buying the products using the catalog.

The research has indicated that there is no competition in this target market.

Critical Success Factors

Critical Success Factors (CSF’s) are the factors or elements that are necessary for an organization to be

successful. For a mail order company to be successful, they would need to retain and increase their

customer r base, increase the response rate at which customers place orders.

The critical success factors for a mail order industry include:

Customer Service

Timely delivery of the products

Products in the catalog

Supplier and Vendor Network

Capital

Ruth estimated that she would need approximately $250,000 to start with $400,000 customers. Ruth is

investing $50,000 of her own funds and managed to obtain $150,000 of private financing in exchange for

equity. The private investors also committed to future investment if required based on group’s judgment.

The table below shows all the expenses that Ruth may incur prior to start mailing out the catalogs. She

would need approximately $200,000 capital to get started. Based on this estimate and the available

investment, Ruth has enough funds to get start on her new venture.

Expense Unit Price Quantity Total

The Catalog Mailer $0.25 400,000 $100,000.00

Addresses, need 10% more than the catalog

number $0.07 440000 $30,800.00

Office Space (Rent / month) $1,500 6 $9,000.00

Warehouse $1.65 12000 $19,800.00

UPS $2,000 1 $2,000.00

Phone Service $500 1 $500.00

Person for phone orders $6 960 $5,760.00

Credit Card Charges $500

Bad Checks/Bad Credit Cards $500

Office Furniture (Approximate) $1,000

Mail, post office fee for early pickup $300

Vendors and Inventory $1,000

Supplies: Cartons, Packing material, tape, labels $2,000

The Catalog

Photographer ($/hour) $30 80 $2,400

Designer ($/hour) $40 80 $3,200

Order form designer ($/hour) $30 20 $600

Printer $10,000 1 $10,000

Extra Resource for Phone Orders and other help

($/hour) $10 160 $1600

Miscellaneous $10,000

Total Capital Needed $200,960.00

The conservative estimates on sales (2% response rate on 400,000 catalogs at $30 per average order) would

result in $240,000 of revenue for the first season, which means the company could be profitable by the end

of the first couple of seasons itself.

Conclusion

The idea of gardening catalog presents a real business opportunity for Ruth and she should pursue the

opportunity as she has the required resources (capital and the network) to do so. I believe she was

successful in building a resourceful network through her connections made while at Avion, HBS and the

connections are willing to help to make the new venture successful.