60-Second Business Plan: Downhill and Dirty
60-Second Business Plan
THE PITCH: The urban-sports set has lots of ways to roll: skateboards, inline skates, and last year's model, the ubiquitous scooter. Now 30-year-old entrepreneur James Page is putting another new spin on Gen-X-style transport. He's invented Crosskates, an all-terrain Hummer-like version of inline skates mounted on 10-inch mountain-bike tires, which he hopes will become the wheeled world's next big thing.
Page, a mechanical engineer, was a New England transplant running a product-design firm in Silicon Valley back in the late 1990s. An avid cyclist and skier, he was biking the hills outside his home when inspiration struck. "I thought how wonderful it would be if you could have that fantastic skiing sensation on mountain-bike trails," says Page, president of the 10-employee Crosskate Inc.
Roughly two years and half a dozen working prototypes later, Page has come up with a cross between a mountain bike and a pair of skis, a product that promises all the facility of the former -- including the ability to climb and steer on wheels -- while offering the gliding and carving feeling of the latter.
A ROLLING START: James Page is turning skating into an all-terrain sport.
The patented steering system, which allows the front wheels to pivot in response to weight shifts, was catchy enough to get Crosskates named best new product at last year's ISPO, the sporting-goods industry's biggest trade show. That distinction has helped Crosskate secure orders from high-end specialty retailers such as REI and Hammacher Schlemmer. The company, based in Florence, Mass., launched its initial product rollout late last summer and shipped some 600 pairs of skates by year-end 2001. And it's planning to produce another 7,000 units this year out of a newly opened plant in Taiwan.
Will Page's target customers -- adventuresome twenty- and thirtysomethings -- actually snatch up his skates? The overall market is clearly big enough. In 2000, U.S. consumers spent more than $1 billion on inline skates, skateboards, scooters, and other wheeled sporting products, according to the National Sporting Goods Association. But skate manufacturer Rollerblade recently failed to stir up much enthusiasm for the Coyote, an off-road version of its popular inline skates. It plans to discontinue the line this year.
Page insists that his product's steering and suspension system is far superior to the Coyote's. And though Crosskates, at $750 a pair, will cost consumers almost twice as much as the Rollerblade model, Page doesn't see price as an obstacle. He's convinced that off-road skating is a sport that's bound to catch on.
For now, the company is sticking to a grassroots marketing campaign. It has recently signed up several ski resorts to offer Crosskate rentals this summer in a bid to build a core base of all-terrain skaters. It's also planning to spark interest with promotional events, trade shows, local demos, and, eventually, televised competitions. "The product is so unique, it creates its own buzz," says Page.
Down the road, Page envisions a whole line of Crosskate products and accessories. But even he concedes he's got his work cut out for him as he tries to start an all-terrain skating craze. Says Page, "It takes time to create a phenomenon."
The Quick Once-Over
Formal Projections: $240,000 in revenues, $300,000 net loss in 2001; $3 million in revenues, breakeven in 2002; $13.7 million in revenues, $1.5 million net profit in 2003; $24 million in revenues, $4 million net profit in 2004
Total Capital Raised: $200,000 in founder's personal savings; $500,000 from angel investors; $500,000 in bridge financing from existing investors
Biggest 2001 Expense: $350,000 for start-up of Taiwanese manufacturing plant Founder's salary: $40,000
The Weigh-in: Our Panel Rates the Plan
Inline or Off-Track?
WHO: David Moross, chairman and CEO of Sports Capital Partners, a Manhattan-based private-equity investment firm
RATING: 3.5 (on a scale of 1 to 10, with 10 being the highest)
"I can see some skiers, inline skaters, and extreme-sports types being interested, but it may only be a faddish interest. And given Crosskates' $750 price tag, the market is probably well under 1 million people, which is small for a sporting-goods product. On top of that, the company is forced to try to grow the sport as it grows its sales with no assurance that its patents will provide barriers to entry for new competition.
"The management team is good, but at this stage the company's success is going to be determined by how well it meets its short-term sales goals and raises interest in the project. This is an extremely high-risk proposition, and management can be relatively irrelevant vis-à-vis good luck in anticipating consumer demand. Plus, finance markets are tight, and seasonal sales make banks and investors nervous."
WHO: Marc Sani, group publisher of Outdoor Retailer magazine and Bicycle Retailer & Industry News, based in Laguna Beach, Calif.
"This activity and product will appeal only to the hard core. I haven't tried Crosskates, but they look like they're for well-conditioned, well-trained athletes interested in adding another training tool. If they structure their company around this reality, they'll be fine.
"In creating demand, they should start to build a core audience through advertising in niche magazines and focusing on niche retailers. Specialty retailers won't have a problem with the hefty price as their overhead is higher and they demand higher gross margins. Larger retailers will probably balk because a lot of people got burned on inline skates. They're basically commodities now. You can find inline skates for $99 at Wal-Mart."
WHO: Larry Newman, CEO of Miller Sports Inc., a Rancho Cordova, Calif., manufacturer of high-end inline skates
"There are bright people involved in the venture, and they've done a good job of executing the plan in terms of manufacturing and distribution. But I think that the market is much smaller than they're anticipating. I guess, at most, they'll sell about 1,000 to 5,000 units annually. And the costs of entry are too expensive to make money in the long term. Personally, I would prove the product and license the technology to as many companies as possible, which would also help protect them against knockoffs. Patents mean very little unless you can protect them. Mostly, you can't. I know companies like Solomon, Rollerblade, and K2 from the inside, and their view is, 'Go ahead, let some upstart try and sue us.' Young companies will die paying the legal fees. This should be one of a larger line of products offered by a big company."
WHO: Robert Carr, editor of Inside Sporting Goods, a New York City based newsletter covering the sporting-goods industry
"This is a great product. It has all the elements to be a Rollerblade Jr. But the company's success is contingent on exposure. A product like this needs a story to explain it. You can't rely on ignorant 18-year-old sales guys selling at retail stores. The company needs to hire a really good promotions person. Infomercials might be a good idea. The price makes it a little hair-raising, but if there's enough fun and fitness, which there seems to be, it'll sell. Also, they should stay high-end. If this thing takes off, there will be guys knocking it off in Taiwan within minutes. Rollerblade created the whole inline business with marketing. Then people started eating them alive with better products."
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60-Second Business Plan: Downhill and Dirty
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