Case 6 - The Big Wind
Urs Siani, an engineer, had been employed by a large housing construction corporation for nine years and had recently been promoted from project supervisor to company vice-president. Over the past year in her spare time, and because of her passion for energy conservation, she developed a radically new windmill in her garage that she hoped would reduce energy costs for farmers in regions where high winds were common.
Based upon her estimates, two of these windmills, together with a storage battery system, would be capable of supplying the normal electrical energy requirements for an average farm. To date, Urs had received a patent for her "Big Wind" windmill system and had sought some advice of professional colleagues as to the best way to market, make, distribute, and service the windmills for potential customers.
Urs calculated that at a selling price of $16,000, she could net $4,000 per sale after paying for materials and labour for two windmills, a storage battery system, transportation and installation that would be required for each windmill system sale. An average farmer could expect to save enough on his electricity charges to recover the cost of the equipment within eight years, according to Urs estimates.
Based upon feedback she received attending a wind-energy conference, Urs believed her windmill could have long-term potential and be made even more efficient with further research and through the use of improved battery systems currently being developed by other companies. Maintenance for the complete system, over the eight-year payback period, including battery cell replacement, was estimated to cost about $1,500, which was about half the cost for comparable windmills used in Europe.
Development of the windmills had already cost Urs more than $90,000, which she financed by mortgaging her home. Business colleagues had told Urs that her business idea would need additional funds for marketing, for renting equipment and building space, for hiring staff, and for covering star-up inventory costs. Urs calculated she would need another $100,000 in order to start the business and her bank had just confirmed they would finance another $50,000 using her retirement savings as collateral to secure this new loan. The banker also told Urs that she should decide quickly whether or not to start this business because several utility companies were reported to be developing new less-expensive consumer applications that would be marketed later that year.
Recently, Urs had hired a consulting company to establish potential demand, and using detailed farm locations and weather charts, they estimated the best markets would be three prairie provinces in Canada (with 11,600 registered farms), and also seven American central states (with 9,700 registered farms) where utility costs were increasing. Another engineer also sent Urs a recent report from Europe where windmills were increasingly used by private homeowners and by smaller businesses to provide most electricity required. Urs was unsure, though, how to sell windmills to farmers, and which types of farms would be the best to approach first. Finally, she wondered how best to proceed given the many different issues she was trying to juggle and how it might affect her life with her husband and two children.