Final Project Submission

Econ 9730
Professor Tracy Henry
 Counter Vand : A Panacea for Graffiti and Scratchiti

I. Executive Summary

Our G-8 Industries, Inc. proposes bringing to market a new product, Counter Vand, that would
entirely revolutionize the current process of glass vandalism protection and remediation. We are
developing a window glazing technique that will protect window treatments and investments
from the blight of graffiti and scratchiti vandalism throughout their entire lifetime. Traditionally,
this process has been costly and labor intensive, with few options and vendors in the
marketplace. In addition to vandalism protection, our glazing process would enhance window
strength, increase insulation and reduce UV rays, thereby providing added disaster protection and
environmental management.

Based on our research, we noted that as there are only a handful of similar firms located in New
York City region, we would like to target NYC market as our entry point. Our target customers
will consist of mainly the residential building owners, commercial building managers and
government/private owned transportation systems. Finally, by creating an industry disruptor, we
can offer significant cost savings and improved outcomes to our customers while also generating
a healthy profit for our investors. It is truly a win-win scenario.

II. Introduction and General Description

Product Motivation
Our product name, Counter Vand, is derived from the two english words counter and
vandalism with the sole objective of countering the glass vandalism and expanding the horizon
of this industry to serve the needs of various market segments. We noted that glass vandalism is
quite prevalent in the five boroughs of the New York City region in many forms mainly
including, but not limited to, spray painting (graffiti) and etching or scratchiti, as it is more
commonly called. Moreover, we noted that the prevalence of the glass vandalism in the City is
adding unnecessary burden to our economy by damaging/destroying our properties including, but
not limited to, subway car windows, seats; residential/commercial buildings; bus stations and
traffic signs, to name a few.

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 Counter Vand : A Panacea for Graffiti and Scratchiti

We had a strong belief that these costs are 100% avoidable, and that belief served as a driving
force and a primary motivating factor to the creation of our product, Counter Vand. In addition,
we did a thorough research to figure out two key benefits that the City and our customers can
have by utilizing Counter Vand. We have outlined and described these benefits in the next
paragraph. While studying the market, we noted that although we have a handful of companies
supplying scratch resistant glass coatings in the national market, the existence of such suppliers
in the New York City market is very limited which makes NYC a suitable market to launch our
product as described in detail in Market Analysis section.

As noted above, the two key benefits that further motivated us in the creation of our product are
described as follow:
a. Effective Utilization of Monetary Resources: We noted that New York City annually
spends millions of dollars to fix the vandalism caused by graffitis/scratchitis. These costs
eventually trickle down to affect the general public in one form or the other, for example
- it could affect the public in the form of hike in public transportation fares; increase in
taxes; increase in the maintenance costs/rent of the housing market, etc. With the usage of
Counter Vand, not only these costs can be avoided, but it will allow our city government
to be able to effectively utilize the freed up money in funding other projects that are
currently being held up due to lack of funding.
b. Preservation of Aesthetics: The aesthetic value of any city is in direct proportion to its
tourism industry. In other words, the more the aesthetic value of the city, more tourists
the city will attract which in turn will bring greater revenue to the citys economy.
Statistically, it was noted that a total of 58.3 million people visited NYC in 2015 which in
turn brought a revenue of $45 billion to the city. [i], [ii]. With that being said, it becomes
very important for us to maintain the aesthetic value of our city and the outcome of glass
vandalism puts a very detrimental impact on our tourism industry by spoiling the
aesthetic value of the city. Therefore, with the launch of our product, we are putting our
best foot forward to preserve the aesthetic value and aid citys tourism industry to boom.

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 Counter Vand : A Panacea for Graffiti and Scratchiti

Products Introduction:
Counter Vand is a transparent self-adhesive polyester coating that can be applied over existing
glazed surfaces that will relieve our customers from the problems of graffitis and scratchitis. One
of the key distinctive features of our product is its high sustainability which not only means that
it is manufactured from recycled materials but we have incorporated the best sustainable
practices into every stage of the product development and gave special attention to the cradle-
to-grave approach that makes the product very environmental friendly, thereby creating a
positive externality in the market. We have also expanded the concept of sustainability to
incorporate the human well-being into the design of the product which makes Counter Vand
capable of eliminating 99.9% of UV rays. This feature of our product will consequentially reduce
the cooling demand of the building in a hot climate which turn will reduce the operational costs
of the HVAC system of the building.

Counter Vand is a scratch proof washable coating that is very easy to apply, comes in various
sizes/tints, strengthens the substrate and can be easily cut into any shape as dictated by the
requirement. The coating is very durable and resilient to all the weather conditions, wear and tear
due to the cyclic weather changes. In addition, the coating is resistant to acid attacks and is fully
washable with water or any other liquid based on the type of damage, as per our
recommendations listed in our product guide.

III. Market Analysis

Our Industry
The removal of graffiti is a large industry in most urban areas. Generally speaking, the majority
of the work falls mostly on the government to maintain the public facets that are tarnished with
graffiti. Here in New York City, graffiti has been a major problem in two main areas, buildings
and the transportation system. While the local government spends a great a deal of effort in
cleaning the city of graffiti, it continues to be a big problem largely due to the costs it brings to
local businesses and the government.

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The MTA spends an average of $20 million per year in cleaning the subway of graffiti. [iii]
Although the damage has significantly decreased over the years, a new form of graffiti, known as
scratchitti, is creating a new crisis, as this form of graffiti is much harder to eradicate. As the
costs rise to remove scratchitti, it leads to prolonged exposure of the graffiti, a factor that is
known to promote more graffiti to gain exposure. The market to provide removal solutions has
seen an increase over recent years, and most consumers are mostly concerned with cost
efficiency.

Market entry is difficult, with several established firms creating a monopolistic competitive
market and controlling a large domain in potential clientele. When evaluating our market size,
New York City is an obvious entry point. According to the NYC real property tax report for
2016, there are 1,095,542 buildings across the five boroughs, including taxable and non-taxable
properties.[iv] 87% of those properties are residential, while approximately 13% are commercial.
The largest number of buildings is in Queens with 356,785. Brooklyn has the second highest
number at 320,560.[v] However, of the roughly 15,000 graffiti complaints received by 311
annually, the highest volume of complaints come from south and central Brooklyn.[vi] This
would make Brooklyn an excellent starting point for selling our product locally. Since we also
have a considerable market with the MTA, we analyzed their fleet of trains and buses, which
consists of 6,400 trains, 5,700 buses, and 16,300 bus stops. [vii]

While our product is technically a window glaze, our competitors are in the category of
adhesives and sealants. Overall this category seems quite robust globally. After a period of
stagnant growth, the adhesives and sealants market has been undergoing a period of recovery
over the past decade due to global building trends. The global market was valued at nearly $22
billion in 2011, up from $19.5 billion in 2006, with the North American Market reportedly the
largest, internationally.[viii] An October 2016 report from Freedonia Group projected that North
American demand for adhesives and sealants would grow by 3 percent annually for the
remainder of the decade.[ix] Global Market Insights, in an April 2016 report, was even more
optimistic, expecting annual global growth rates for adhesives to be approximately 5 percent.[x]

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 Counter Vand : A Panacea for Graffiti and Scratchiti

Product Differentiation
Our market has a wide array of competition for CounterVand, including chemical treatments,
and disposable films. We believe that CounterVand will be able to integrate itself into the market
and gain its customer base on two premises: Cost efficiency and a one and done approach. Our
product will rely on comparison to the competition to show that our price point is significantly
lower when considering the nature of repeat damage that would lead to continuous expenses with
similar products. CounterVand introduces a new technology that is able to withstand future
damage from graffiti without the need to replace our treatment. This assertion will be marketed
and supported through our warranty for the life of our product, which we will estimate to be ten
years. Our presentation of our product and services will include a professional installation of our
treatment, followed by a ten year warranty promising no damage to the glass being treated.

Our CounterVand Consumer

Our main source of consumers will lie in the commercial sector with a focus on business with
considerable land structures. Graffiti is most harmful to businesses that depend on their stores
aesthetic value, as it directly correlates to their business foot traffic. Given our products
durability, businesses with thick, expensive glass panels will benefit the most from having a
permanent solution that will eliminate the need to replace the glass structure.

In addition to businesses with thick glass structures, our second focus within businesses will lie
in businesses in their opening/start-up phase. While it may be more difficult to persuade existing
businesses to install a permanent solution that might cost more, businesses opening a new
location will have a more open mind to long term savings that they can allocate to opening costs.

Our Competition
In surveying the competition in our market, it is a monopolistically competitive market with a
number of large and small players already competing. These firms can be looked at in several
ways. There are a number of larger competitors with the dominant market share positions,
including Solar Guard, SunTek and Johnson Window Films. There are also a number of smaller
competitors, including VVivid, ASWF, TintCenter. BDF and TechnologyLK. The types of
products and services existing firms provide can be broken down into either commercial or
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 Counter Vand : A Panacea for Graffiti and Scratchiti

residential products/services and then, again, by the type of products and services they offer.
The majority of the firms sell removable window films or the services to install and replace these
films or both. In addition, there are a number of niche firms that sell window graffiti cleaning
services, including chemical cleanings and window repolishing for removal of scratched or
etched surfaces. The last two can be extremely time consuming and expensive.

In considering our competitive landscape, the following SWOT

analysis was developed:

Strengths: Low Price Point, Strong Local Market, Existing

Customer Contacts, Convenience
Weaknesses: Lack of Brand Recognition, High Barriers to Market
Entry, Limited Market (long lifetime, limited re-buy), need for
significant start-up capital
Opportunities: Fragmented Market, High Cost Competition, Localized (Urban) Need, One-and-
done, high-value solution
Threats: Established Competitors, Potential Long lead time to market, Monopolistically
Competitive

As mentioned, our product has a significant differentiation from other products in the market
place. It is applied at the point of purchase and will protect the window for the lifetime of the
product. Our largest competitors window film covering solutions, while eliminating full
window replacement costs, are still relatively expensive. Each film replacement costs
approximately 25% of the initial window costs, once removal of the damaged film and
installation of a new film are included.

The great convenience of our solution, which should last for the windows lifetime (estimated at
10 years), is both a marketing strength and a long-term market weakness. Whereas films need to
be replaced each time a window is graffitied, our solution is washable and impervious to damage
from scratching or etching, which means that the original glazing should be the only purchase
necessary for the windows lifetime. While this is extremely attractive to our potential
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customers, it has the drawback of limiting repeat business with no built-in obsolescence. We
will need to factor in the lack of repeat buyers as we set our pricing strategy. In the near-term,
our significant cost advantage should drive adoption and the size of the market is large enough to
provide years of customers before the lack of turnover would be felt.

Our initial customer base will be commercial building developers, owners and lessors in New
York City, starting with Brooklyn, given our firms proximity and the size of the existing market.
Our strategy will be to approach a number of high profile clients with large new developments
and offer them their initial window treatments gratis in return for their endorsements on all
marketing materials. As noted, the cost of our product is relatively low and the value of these
customer endorsements would be high. While this approach slightly delays the recognition of
revenue for the company, it will provide the referenceable client base and name-recognition we
will need to court our target audience. We have established a healthy marketing budget and will
make liberal use geo-targeted advertising, as we are initially focused specifically on the NYC-
based market.

IV. Funding and Financial Outlook

As mentioned previously, there are significant barriers to entry into the marketplace for our
chosen product. While we have an initial idea and a feasible business plan, we will need to
spend significant funding in product development, testing and certification. We estimate a $1M
start up funding need. We intend to bootstrap the initial planning phase, including target market
estimations, revenue projections and even signed initial high-profile customer agreements prior
to seeking venture capital. We will look to do at least two funding rounds, one to underwrite the
initial development costs and the second to underwrite testing and marketing costs. We believe
that promising product development will be key to encouraging funders to provide additional
support. We intend to retain 51% controlling shares of the business.

Our estimated, high-level start up budget is as follows:

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 Counter Vand : A Panacea for Graffiti and Scratchiti

Start-up (1 yr)

Management Team $ 125,000.00

Development Space $ 60,000.00

Manufacturing Equip $ 50,000.00

Development (incl. engineer) $ 300,000.00

Testing $ 25,000.00

Certifications $ 15,000.00

Marketing $ 250,000.00

Sales $ 125,000.00

Insurance $ 50,000.00

Basic Startup costs $ 1,000,000.00

On an on-going basis, we have estimated our annual operating expenses. These costs are based
upon an annual production rate of approximately 30,000 window treatments, or three times the
demand we project for our initial market penetration. The on-going cost estimate is represented
in the table, below:
Operations

Manufacturing Space (rental) $ 120,000.00

Manufacturing Equip $ 25,000.00

Development $ 150,000.00

Testing $ 25,000.00

Certifications $ 5,000.00

Marketing $ 250,000.00

Sales $ 100,000.00

Insurance $ 50,000.00

Staff (10) w/benefits $ 650,000.00

OTPS $ 200,000.00

Annual Operations $ 1,575,000.00

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 Counter Vand : A Panacea for Graffiti and Scratchiti

Finally, in estimating the sales and revenue potential for the product, we considered the local
market size, our costs and the pricing of our competitors. Commercial glass for windows is a
large expense for developers and business owners. The average installed cost of glass is
approximately $50 per square foot, meaning that the average 10X12 glass window costs
$6,000. Each business has multiple windows of that size. Protecting that investment has major
financial benefit to the business owner in terms of brand maintenance for foot traffic and bottom
line cost.

As noted, there are 130,000 commercial buildings in the five boroughs of NYC, if we are able to
achieve a market penetration of 10%, that would give us a market ceiling of 13,000 commercial
customers in NYC, alone. Our average unit cost of production runs at approximately $26 per
10X12 window. Our fully loaded costs (including overhead costs) runs just over $52 per
window treatment, At this time, we are unable to calculate marginal cost. Our competitors
price over the same 10 year window lifecycle runs $1,500 per replacement film (for the similarly
sized 10X12 window). Were we to charge a third of that price for our lifetime glazing, or
$500, we achieve a projected revenue of $6.5M on the first 10% of the NYC market (13,000
customers) and a net revenue of nearly $4M after recouping our sunk costs. We believe this
level of market penetration is attainable in the short run, given the market demand, the products
value and the exceptional pricing strategy. If we are correct, our return on investment is
exceptional! With more concrete evidence of this investment opportunity in hand, we believe we
could attract the necessary venture funding for start up.

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 Counter Vand : A Panacea for Graffiti and Scratchiti

Endnotes:
[i] New York Times: http://www.nytimes.com/2016/03/09/nyregion/record-number-of-tourists-
visited-new-york-city-in-2015-and-more-are-expected-this-year.html
[ii] Wikipedia: http://en.wikipedia.org/wiki/Tourism_in_New_York_City
[iii]http://web.mta.info/nyct/facts/ffsubway.htm
[iv]http://www1.nyc.gov/assets/finance/downloads/pdf/reports/reports-property-
tax/nyc_property_fy16fmvandav.pdf
[v.] Ibid.
[vi.]http://ibo.nyc.ny.us/cgi-park2/category/buildings/ and http://www.metro.us/local/working-
for-a-graffiti-free-nyc/tmWnff---7aONlLCIhTjI
[vii.] http://web.mta.info/nyct/facts/ridership/
[viii.] "Adhesives and Sealants." Encyclopedia of American Industries. Farmington Hills, MI:
Gale, 2017. Business Insights: Essentials. Web. 10 Mar. 2017
http://bi.galegroup.com.remote.baruch.cuny.edu/essentials/article/GALE%7CRN2501400192/55
bfbd8ef7a8d580294d638e9a779474?u=cuny_baruch
[ix.]http://www.prnewswire.com/news-releases/adhesives-and-sealants-global-markets-3rd-
edition-160662245.html
[x.]"Adhesives and Sealants." Encyclopedia of American Industries. Farmington Hills, MI: Gale,
2017. Business Insights: Essentials. Web. 10 Mar. 2017
http://bi.galegroup.com.remote.baruch.cuny.edu/essentials/article/GALE%7CRN2501400192/55
bfbd8ef7a8d580294d638e9a779474?u=cuny_baruch

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