Zipfy is a hit, but Oakville’s Great Circle Works needs talent for next big toy
Toys and sporting goods
With only five years in business, they reached almost $4million in sales last year
Mark Cahsens didn’t see it coming. He’d founded Invisible Hand, a 12-employee e-commerce startup, in 1999. Two years later, the tech bubble burst.
He opted to sell the company rather than face an increasingly bleak business outlook. The experience convinced him to leave the startup game, for the time being.
In 2007, when he founded a new company, Great Circle Works, he resolved to go about things very differently. He’d peddle consumer goods instead of software. And, critically, he’d hire the smallest number of staff he possibly could.
Now, with just four full-time employees (including Cahsens), Great Circle Works is lean—almost ascetically so. Its low overhead gives it plenty of flexibility, but Cahsens is strained. He’s the company’s one and only full-time ideas person, and the business depends on great ideas to fuel sales. As it stands, only one idea has caught fire so far, and although it’s bringing in plenty of cash, one-product companies rarely stay alive for long.
“That’s the main pressure I’m feeling right now,” he said, “trying to find the next hit.”
The Oakville, Ontario-based company started when Cahsens, at the suggestion of a friend, began working with some consultants to develop Zipfy, a type of compact plastic sled with a long, black steering handle for easy maneuverability. The sleds are only 21 inches long, but can accommodate an adult weighing as many as 250 pounds. Cahsens figures he’s made about a million of them to date.
And yet, even though Zipfy has been a success, Great Circle Works is still not hiring.
The company had about four million dollars in sales last year, said Cahsens—which works out to one million per full-time employee. And Zipfy has enough buyers that its medium-term future seems secure: the sleds are sold by several major retail chains, including Canadian Tire, Costco, and Target. The company has developed a few new products (a spherical puzzle-like toy called Oblo, an inexpensive commuter bike named Tütsl), but Zipfy still accounts for about 80 per cent of its business.
Cahsens has been averse to adding to his company’s headcount since day one. When he founded Great Circle Works with startup capital out of his own pocket, he avoided taking on any employees until he’d already secured a 10,000-unit order from Canadian Tire.
“They really liked the product,” Cahsens said. “It was unique, in a category that doesn’t often see that much innovation.”
With the proceeds, Cahsens was able to buy production molds for Zipfy—a substantial investment. He spent the money, he said, “with confidence that I had already broken even.”
In 2007, as the fledgling company grew, Cahsens finally brought on a single full-timer. But that was the only hire, with the exception of a few temporary workers who helped promote Zipfy at trade shows. Only in 2011 did Cahsens relent. He added two more full-time positions to help with sales, marketing, and fulfillment.
The company is able to operate with a skeleton crew thanks to outsourcing. A facility in Buffalo molds the sled, contractors handle warehousing and shipping. Even design is partially outsourced—Cahsens works with freelance inventors, and pays them royalties.
Yuval Deutsch, a professor of policy and entrepreneurial studies at York University’s Schulich School of Business, thinks outsourcing can help a fledgling company.
“Especially for small firms,” he says, “they don’t have economies of scale in-house.”
Great Circle Works doesn’t actually own anything but office equipment, production molds, intellectual property—and its good name with customers. Sales and marketing are the only operations completed entirely in-house.
In situations like these, Deutsch sees potential for danger.
“The other side of the coin,” he says, “is that when you have your company, and you’re able to get assets which are unique and valuable—and, importantly, very difficult to imitate—you can get a competitive advantage.”
Great Circle Works doesn’t have that advantage.
“This company, if they outsource absolutely everything, doesn’t have any unique trait,” he says “If they can purchase the service from outside, any company can purchase the service from outside.”
In other words, Cahsens is banking on the distinctiveness of his proprietary designs. They’re all he’s got.
Still, staying lean allows the company to meet the demands of its clientele without incurring a lot of financial risk. If Great Circle Works owned its production facilities, it would have to run them throughout the year in order to make a return on its investment. Contracting means Cahsens can produce a year’s worth of goods in about two months, without having to sink huge amounts of money into capital.
Outsourcing also helps the company deal with a yearly order surge before the Christmas season. When Cahsens needs more product, he orders more product, and rents more warehouse space. When things are slow, he cuts back on production and storage.
But, as sales continue to grow, expansion may become a necessity. It’s especially obvious during that pre-Christmas rush, when orders pour in and his staff is overwhelmed.
But even with new products making inroads, Cahsens is always looking for more efficiencies, especially if they might allow him to put off new hires.
“Lately I’m even thinking about working remotely,” he says.
Sometimes, evidently, even an office is too much.