CBC’s Dragons’ Den is back with two new dragons who are wasting no time making their mark. Each week, Financial Post contributor Mary Teresa Bitti revisits the previous week’s episode. She captures what the cameras didn’t and in the process provides a case study for readers, zeroing in on what pitchers and dragons were thinking and what the challenges for the deal are going forward.
Article by Mary Teresa Bitti | October 19, 2014 7:30 AM ET / Author at Financial Post
The pitch As sales director for an underground mobile equipment manufacturer, Alicia Woods spends her fair share of time underground, understanding the challenges of customers. She recalls the first time she had to go into a mine 14 years ago. She was handed full Personal Protective Equipment (PPE), coveralls, belt, hard hat but nothing was designed for women. “I was given the smallest men’s sizes but nothing fit properly and it wasn’t convenient, especially if I had to use the washroom facilities, which are typically a port-a-potty,” Ms. Woods says.
The only alternative she found online was a shirt and pants. She preferred the coverall which offers better protection. She sketched a few concepts that got put to the side as her career started to grow and she and her husband started a family. For 10 years, she would have nothing to drink if she knew she’d be going down into a mine, to avoid having to use the washroom.
“Three summers ago, I was underground at a potash mine and before I knew it I had consumed three bottles of water because it was so dry and dusty,” Ms. Woods says. “I had to face what I had avoided for a decade. It was not a pleasant experience.”
Ms. Woods began working with a seamstress in Sudbury to develop her first sample. It took about eight months, during which time she researched market potential and quickly realized she had an eager audience. In the mining industry alone, 15% of the workforce is female or 21,000 women, who typically purchase two to five coveralls at a time two to three times a year. Working with a Montreal manufacturer that has been producing male work wear for the past 40 years, Covergalls, the first Canadian-made and designed coverall for women launched in spring 2013. Special features include a drop back, secured pockets and snaps at the wrists for a better fit.
By the fall, major mining companies began to show interest and sales, which were largely through a distributor, were ramping up. In spring 2014, right around the time Ms. Woods pitched the dragons, she launched an online store.
At the time she faced the dragons, Covergalls had sales of $61,000 with a forecast of $180,000 by the end of the year. The product ranges in price from $130 to $282 depending on the material, striping and colour.
The deal Ms. Woods asked for $75,000 in exchange for a 20% stake, with the funds targeted to building inventory by placing a large order to achieve economies of scale, improve margins and build brand. She received four offers and accepted a deal from Michael Wekerle, Arlene Dickinson and Jim Treliving for $75,000 for a 30% stake. Mr. Treliving has since dropped out of the negotiations. Ms. Woods has also been busy expanding the product line.
“We’ve teamed up with Mechanix Wear, which makes high performance work gloves, to produce a co-brand glove that will be available next month. The company is also in the sample prototype stage of a male version of Covergalls called Coverguys. “We are also developing a bib style overall keeping the same features to go after the outdoor adventure market. “Both new products should launch next year.”
A dragon’s point of view At the time of writing, Mr. Wekerle was preparing to close the deal. “I’m excited. Covergalls is a good adaptation and it’s unique,” he says.
“Alicia has entrepreneurial skill. She knows the industry, has a strong technical background and has created a practical niche solution that has good potential. She also has a passion to do something that will be a real benefit to people.
“Covergalls helps level the playing field for women in mining. Plus she’s a good salesperson. I think the challenges will be ensuring we’re able to deliver without any production hiccups and that we’re able to get to the right people. There’s been a lot of consolidation and rationalization in mining that has created mega corporations.”
The expert’s opinion John Cho, a partner at KPMG Enterprise, likes the opportunity presented by this niche market. “The demand side of the equation will increase as more women enter the industry,” he says.
“She’s already had nice wins in terms of sales. The challenge will be managing costs as orders grow. She’ll need to ensure she has the right credit facilities in place to manage working capital cycles and fund larger inventory purchases. This will also require negotiating favourable terms with her suppliers so that they mirror or extend beyond customer payment terms as well as a good inventory management strategy — another key factor in effective cash flow management.”
You can read the original article and check out more stories from Mary Teresa Bitti here.