60-Second Business Plan

The pitch: Marc Shuman aims to help garage owners get to their cars without tripping over tools and toys or bumping into barbecue grills and bikes. Give him a garage to work on, and he promises to straighten things out. "Garages can be a lot more than just a place to dump junk," says Shuman, president and cofounder of GarageTek, a two-year-old start-up based in Port Washington, N.Y.

GarageTek's contribution to the war on clutter: a "garage organizational system" consisting of patented slotted wall panels and an array of modular attachable cabinets, shelves, bike racks, and workbenches -- all styled in the same light-gray steel and plastic and bearing the yellow GarageTek logo.

A self-described "neat freak," Shuman devised an early version of the slotted wall panel while running his family's store-fixture manufacturing company on Long Island. He and a partner adapted the panels and tested them out on his mother-in-law's two-car garage, which was packed with 30 years' worth of junk. "The transformation was just staggering," he says.

So far, GarageTek has worked that transformation on more than 1,000 garages in 10 states, though the decluttering doesn't come cheap. The company's average sale (including design, components, and installation) is $4,500, says Shuman, whose target market is owners of houses worth an average of $350,000 or more, or roughly the top 20% of the nation's 50 million houses with garages. Even with the steep cost, Shuman says, sales have been twice as high as projected, with revenues expected to climb to $6 million in 2002.

To keep overhead costs down, Shuman maintains a staff of just four employees and distributes the GarageTek system entirely though local franchises. As of March, the company had 21 franchisees scattered from Massachusetts to California. Franchisees invest between $200,000 and $250,000 up front, including a $50,000 licensing fee, and pay 6% of gross sales as an annual royalty, plus another 4% for advertising.

Shuman has signed on a dozen manufacturers in Canada and the United States to supply the wall panels and the 70-odd components GarageTek offers. The company buys the wall panels from Royal Group Technologies, a giant plastic-products manufacturer based near Toronto, for distribution to the franchisees. Franchise owners order the other components directly from the manufacturers, who pay GarageTek a 10% commission on all sales.

To spread the word on its garage-improvement system, Shuman and his franchisees advertise in upscale home magazines and by direct mail. They also market through builders, who hawk the GarageTek system as an add-on feature in new-home construction. So far Shuman has signed on three major luxury home builders as partners, including industry leader Toll Brothers.

Of course, Shuman concedes that big-box stores like Home Depot and Lowe's sell a wide variety of garage-improvement fixtures at prices generally below his. But nobody, he says, can beat GarageTek's package of durable, waterproof, and movable components, branded and installed. "We're far from being a Jello or a Coca-Cola," says Shuman, "but we're determined to build a national brand."

The Quick Once-Over

2001 Results: $1.5 million in revenues, breakeven

Formal Projections: $6 million in revenues, $400,000 net profit in 2002; $12 million in revenues, $1.5 million net profit in 2003

Capital Raised: $2.7 million, including $2 million in venture capital from Stonehenge Capital Corp. and $700,000 from Shuman's father

Biggest First-Year Expense: $500,000 payment to wall-panel supplier

CEO's Salary: $200,000

The Weigh-in: Our Panel Rates the Plan

Clean Sweep or Big Mess?

Who: Carl Youngman, a managing director in Boston venture-capital firm Triumph Capital Group Inc. and former part owner of three franchise companies

Rating: 6 (on a scale of 1 to 10, with 10 being the highest)

"In America we have too much stuff, so there's room for a company that helps to organize that stuff efficiently. And GarageTek could definitely win a competitive advantage by offering a high-quality product and premium customized service.

"But GarageTek's marketing plan seems to rely too much on a push strategy, meaning there's too much emphasis on using builders to sell the product. It would help if in picking its franchisees, the company reached out to vendors who already have other income sources, such as those who make patios, install swimming pools, or build sunrooms. That could do a lot to extend the company's distribution."

Who: Kip Tindell, CEO and president of the Container Store, a Dallas-based national retailer of storage and organization products

Rating: 7

"One of the most exciting growth areas in our business has to do with organizing our customers' garages. We see a growing demand for products that solve people's organizational problems, which is especially true for high-end customized products. And GarageTek is aiming for the high end of the market, so I think it's in a really good business.

"My biggest question concerns the marketing plan. Customers who are willing to spend more than $4,000 to organize their garages are tough to reach, and I don't feel that GarageTek has allocated enough money to do the job. As for the name of the company, I like the word garage coming first, but I have my doubts about tek, which seems to imply technology, not organization. Having the right name is a vital part of a company's plan for building a successful brand."

Who: Boyce Thompson, editor-in-chief of Builder, the leading business magazine for residential builders

Rating: 8

"A key to GarageTek's marketing plan is selling its product through home builders. Most builders are already set up to sell various options -- ready-made closet shelving, for example -- on behalf of a host of vendors. In fact, those kinds of sales account for a growing share of profits from new-home sales. So GarageTek would be a natural partner for the builders. And it's in a thriving market segment, since many affluent boomers are now moving up to a better house for the first or second time. But GarageTek will have to educate American home owners about the very concept of a garage-organization system. I doubt that many people are even aware that such a thing exists."

Who: Thomas C. Kinnear, professor of marketing and entrepreneurship at the University of Michigan Business School and former franchising consultant for Domino's Pizza

Rating: 6

"The issue is, How many people will spend $4,500 to solve a let's-put-stuff-away problem when there are much simpler solutions? I have my doubts about the price tag. To my mind, the competitor is a handyman service or local contractor who's building the house for you and will just put shelves in your garage. On the other hand, selling through contractors could be an opportunity in wealthy neighborhoods. For a wealthy person, a few thousand bucks added on to the purchase of a house is trivial if the buyer gets a wonderful garage.

"Some of the economics also trouble me, especially the franchise terms. The company wants a 40% gross margin on the wall panels it sells to the franchisees, plus a 13% royalty income off its gross revenues. Those are big numbers for the franchisee to swallow."


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