Turning a great building products idea into reality

Background/ Situation

Our client was comprised of two small building contractors who together had invented a building panel made from recycled waste and which offered exceptional thermal insulation and fire-resistant properties. Our client had the invention related intellectual property, however they had no funding to get their idea of the ground. In addition, they had limited corporate, financial, marketing and managerial experience, not to mention the time, to pursue their venture.

Consequently, MACHUS Solutions was engaged to develop a detailed business plan, seek funding to build a pilot plant and prepare the groundwork for our client to become a major supplier to the building and construction industry.

Initial Findings

Upon engagement, MACHUS Solutions undertook a preliminary investigation of the business. The investigation revealed:

• The panel was a genuine invention and could be manufactured at a competitive price
• The panel offered faster wall construction when compared to traditional materials
• The panel could be made at short notice. This allowed field testing and construction trials to take place
• Sporadic field testing confirmed the exceptional thermal qualities and fire-resistant properties of the material
• The required funding would be approximately $2 million. However, based on a more detailed analysis this proved to be conservative
• The composition of the materials that made up the panels was kept so secret that no one aside from the two small building contractors were privy to the formula
• Our client initially wanted to be involved in the manufacture, wholesaling and actual construction of the panels
• There was no corporate structure for the business
• Our client had not sought legal or accounting advice regarding the proposed venture

Solutions, Strategies and Recommendations

MACHUS Solutions recommended the following strategies:

• Position the venture as an inventor and developer of building products. While it was accepted that initial manufacture would be executed by our client, long term manufacture would need to be open to established building material suppliers
• Divide the venture into three stages, while focusing on the delivery of a Stage 1
• The completion of a detailed Business Plan, including a financial model for the venture, which was Stage 1. The financial model would include a sensitivity analysis to allow financial evaluation of likely “what-if” scenarios
• Structure the business to protect the intellectual property and provide a ready-made platform for investors
• Perform a comprehensive testing program of the panel and obtain appropriate certifications as required by Australian authorities
• Evaluate manufacture of the product in Australia
• Stage 2 included the building of a pilot plant which would manufacture sufficient material to test the market and gain a small percentage of the residential building market
• Stage 3 included a larger, more efficient plant, which would increase volume and reduce unit costs. Stage 3 also explored the sale of the venture preferably to an established building materials supplier
• Become a Quality Assured organisation by obtaining certification under ISO 9001:2000

Implementation and Results

MACHUS Solutions successfully met the client’s brief. In addition to delivering the following, we helped secure an investor who agreed to underwrite our client’s venture:

• A comprehensive Business Plan for Stages 1 and 2
• A financial model, including sensitivity analysis, as mentioned above. The model indicated that the original $2 million estimate had to be increased substantially in order to meet our client’s requirements
• Preparation of an Information Memorandum, in accordance to the Corporations Act and ASIC requirements
• A Financial Review advertisement that met strict ASIC guidelines seeking investors for the venture. The advertisement generated 23 leads of which 3 were considered serious
• Participation in Stage 2 as a mentor and coach, particularly in the reporting and accounting aspects of the venture
• Independent certification meeting ISO 9001:2000