When the lenses begin to sell, Animalens wants to be ready. Wise has contracted the manufacturing to a Massachusetts plastic injection-molding company, and he's been accumulating inventory. With six machines cranking away, the plant can make about 80 million pairs annually, enough to generate $12 million of revenue.
As a matter of policy, Animalens intends to stay away from independent sales representatives and build a dedicated sales and service staff of its own. Eventually, Wise hopes to place sales-service representatives in satellite offices -- first in the United States and later in offices overseas. Not many, he says; perhaps 10 or 15. But he refuses to do anything until the revenues start to materialize. "I've learned from earlier experience that you shouldn't spend it until you've got it.'
That's where things stand. Randy Wise thinks he's got an awfully good shot at changing the way that egg farmers do business. "That's what kept me from letting this idea die," he says. He's put up a lot of his own money and convinced many of his friends to do likewise. In Wise's mind, it's not whether his product will succeed, but when.
The only people who haven't signed on yet are the people who will determine the outcome: the ranchers themselves. Wise thinks he's on the right track. "Chicken farmers aren't known for jumping the gun," he comments. Whether he'll be able to win their confidence before he loses his own remains to be seen.
* * *
Research assistance was provided by Leslie Brokaw.
EXECUTIVE SUMMARY
THE COMPANY
Animalens Inc., Wellesley, Mass.
Concept: Make and market red-tinted contact lenses for egg-laying chickens, altering their behavior so they will fight less, eat less, and produce more eggs -- increasing egg-ranch profitability
Projections: Eventual pretax net margins of 25%; 1989 sales of $329,000; 1992 sales of $24 million
Hurdles: Persuading historically conservative egg farmers, operating on thin margins, to risk money up front for an unproven product; sustaining the company in the face of slower-than-expected product acceptance; defending an easily copied product from competitors likely to enter after the market has been opened
THE FOUNDER
Randall E. Wise, 40, CEO
Randy Wise's decision to sell contact lenses for chickens is not the result of a sudden impulse. He's been preparing for this since he was a teenager in California.
Back in the the early 1960s, his father, a chicken rancher, got involved with a similar venture. The idea then was to reduce the cannibalism of egg-laying chickens with a lens that distorted their vision. The business flopped, but the goal -- improving the economics of egg production -- is something Wise didn't stop thinking about.
At Harvard Business School during the early 1970s, he wrote a popular case study that evaluated his father's ill-fated experience and outlined the opportunity for a new company. It explored the economics of egg ranching and examined the options for marketing the new lenses. Even today, the case (which sells about 6,000 copies annually) is used in business schools all over the country to highlight pricing and marketing questions.
Wise hoped to launch the business right after business school, but he couldn't get the financing. "Investors had a hard time relating to egg production," he recalls. Fifteen years later, with money in the bank, he's raring to go again.
Wise thinks the odds of success have improved with time. For one thing, plastic molding technology has moved way ahead. Chicken farmers, too, are a little less resistant to newfangled ideas than they once were. And, having built one successful business, Wise believes he knows how to build a second. Initially, for example, he's got a team of just three full-time employees, and he's resisting every impulse to spend money in advance of sales. "I'm a lot smarter than I was when I wrote the business-school case study," he says.
So what does he worry about? These days, Wise says, the biggest danger may be overconfidence. "The way I see it, the next 12 to 18 months are critical. As much as we believe in this, we have to sell it. You can't believe it's going to happen until it actually happens.'
FINANCIALS
Animalens Inc. Projected Operating Statement
(in $ thousands) 1989 1992
Sales $329 $24,050
Cost of goods sold 195 13,425
Gross margin 134 10,625
Expenses
General & administrative 247 1,280
Marketing 126 961
Sales 96 1,979
Research & development 0 350
Net interest 0 (185)
Total expenses 469 4,569
Profit before taxes (336) 6,056
Animalens Projected Sales
(in $ thousands) Sales Profit
1989 $329 ($336)
1990 2,483 391
1991 12,170 3,100
1992 24,050 6,056
WHAT THE EXPERTS SAY
FINANCIER
DAN TESSLER
Partner at Tessler & Cloherty Inc., a $50-million venture capital firm in New York City; former president of a feed-supplement company
The basic economic premise that the business addresses is a reasonable one, but I sense that Wise and his people have miscalculated the uniqueness of their selling proposition from the point of view of the people they're selling to. Wise seems to believe this product really can and should sell itself, because it's so overpoweringly valuable and important that customers shouldn't be able to resist it.
