Risks and Mitigations
Risk: Ben Fulton (designer), leaving or becoming incapacitated.
Mitigation: All designs for pedals are the property of Red Witch Analog Ltd. The manufacturers keep hold on behalf of the company all plans, designs and schematics to all our pedals. Ben Fulton has a restraint of trade in his employment contract.
The existing shareholders have invested heavily in developing a full range of pedals as quickly as possible, meaning that the company is not relying on new pedal design for the future.
Risk: Key staff leaving. Red Witch operates with a small number of staff who have had to work under considerable pressure without backup.
Mitigation: Tracey has put considerable time into implementing business systems which enable the company not to be reliant on one person. Also with funds sought Red Witch will be able, and intends to, employ more staff to support the existing key staff.
Key staff are also paid a base salary with built in incentives to meeting KPI's, key financials and profit. At the end of each financial year remuneration and incentives are reviewed.
Tracey Neil and Ben Fulton have been offered and accepted share options, which will be enacted by the board upon this offer being successful.
Risk: Management execution of strategy and plans.
Mitigation: Few small companies can draw on the sheer breath of experience and expertise Red Witch can in the key areas of product design, project management and marketing strategy and execution. See Our People.
Risk: Global Trading Environment.
Mitigation: Red Witch buys and sells in US dollars. In its forecasts Red Witch has made no allowance for inflation or deflation. Guitar floor-effects market over the past ten years has shown the most consistent and stable growth in the music trades industry. The music trades industry is also a mature and stable industry and has grown each year for the last four years since the down turn post GFC.
Risk: Growth is slower than forecasts. Failure of Red Witch's distribution/dealer network to perform. Red Witch is reliant on its distributors to meet the forecasts they provide. Not meeting these targets will affect Red Witch's ability to grow.
Mitigation: Red Witch ensures regular communication with its distributors and dealers, working closely with its distributors to build and agree yearly marketing plans and sales targets. By increasing marketing spend over the next two years Red Witch expects to give the distributors a boost towards reaching their targets and growing future revenue.
Risk: Digitisation and computerisation of the world will erode the analog market.
Mitigation: Doing what Red Witch does well is the best mitigation. Red Witch is at the premium end of the analog market. Analog sound will always be sought after, especially for anyone wanting to play live. Computerisation will have its place in the market but so to will analog. Also, Red Witch is not looking to enter the mass market (1.1 million units were sold in the USA alone last year) and is aiming to sell circa 40,000 in the 2020 year.
Risk: Failure to gain traction with the marketing programme.
Mitigation: Have on board proven marketing and project management expertise, and then constantly research, monitor and review.
Risk: Exchange rate movement.
Mitigation: Red Witch buys and sells in US dollars helping mitigate any large fluctuations in the US/NZ exchange rate, as well as US/Euro and US/UK. The largest effect on currency fluctuations is actually at the consumer/dealer level where consumers can shop around online looking for the most favourable price due to exchange rate fluctuations.
To support its dealers, Red Witch is implementing a policy that any warranty returns have to be sent back to shop of origin, to encourage consumers to buy locally.
Risk: Competition - copying of Red Witch products.
Mitigation: The development of the brand is the best protection against copying. See Intellectual Property.