High-Tech Sled Sends Oakville Company To Profit Peaks

Call it the tobogganing dream of the nine-year-old in all of us. It starts with a long chairlift ride to the top of an alpine ski run.

You plop yourself into your sled, but unlike the thinly padded butt-bruisers of old, this one cradles your rear better than a crate full of Charmin. Lifting your legs, you begin your slide; before you know it, you’re rocketing down the run. But you’re in complete control, leaning side to side to carve a path as well as any Crazy Canuck. As you cross the imaginary finish line, you dig in your heels, stopping in a shower of snow to the roar of the make-believe crowd.

This tall tale is no fantasy to the adherents of Zipfying. Adult speed-seekers are taking their conceived-in-Canada Zipfy sleds to ski slopes around the world, while countless kids are using Zipfys to make one winter pastime even cooler. And their numbers are growing at a spectacular rate.

Mark Cahsens, the Oakville, Ont.-based serial entrepreneur behind the Zipfy, originally had just one goal for his firm: to sell vast numbers of his snow sleds. He could have eased up a bit after Zipfy Inc. achieved this feat. But where’s the fun in that?

Cahsens has built Canada’s hottest start­up entirely through sales of Zipfy sleds. With two-year revenue growth of 2,277%, his firm tops the 2010 PROFIT HOT 50 ranking of Canada’s Emerging Growth Companies. And its sales, which hit $1.2 million in the year ending July 31, 2009, continue to soar. Revenue, still solely from sleds, almost tripled to $3.4 million in fiscal 2010. Total Zipfy shipments have surpassed 350,000 units; and in August alone, retailers ordered more Zipfys than in the entire previous 12 months.

Despite this extraordinary success, Cahsens has scrapped his original plan. Rather than simply ride his sleds as far as he can, he’s embarking on a daring expansion into an array of products—starting with puzzles, watches and bicycles—that to most eyes have nothing in common. Cahsens expects to have a portfolio of about 10 products by the end of 2011. Yet he does no market research and has no master plan for which categories to enter. At first glance, this strategy looks not just daring but foolhardy. Why expand into a seemingly random assortment of new products when the Zipfy has so much more potential? But Cahsens insists he’ll avoid a wipeout by reapplying the tactics that have helped his unknown startup seize shelf space at big-name retail chains without risking a bundle—and by continuing to trust his inner child.

Cahsens wasn’t always risk-averse. In the late 1990s, while running two Silicon Valley tech startups that failed to make it to an initial public offering, he followed standard Valley practice. “You raised the money, hired a team and then figured out how to make a product,” says Cahsens, 41. “Now, it’s the opposite: first, I make a sale; next, I make the product; and then, as we’re bursting at the seams, I hire.”

By 2006, when Cahsens founded Zipfy Inc. (recently renamed Great Circle Works Inc.), he no longer wished to sell dry technical products but, rather, something fun and tangible. Cahsens, who loves design but has no formal training in it, based the idea for his sled on ones he saw in Bavaria. Modelled on coal shovels, the sleds combine a thrilling ride with solid control through ridges on the underbelly. Cahsens and an industrial designer spent two months crafting their version of this design. The result was the Zipfy, which can support a 250-pound rider, weighs just 3½ pounds and is safe for riders ages seven and up.

The Zipfy seemed a natural for Canadian Tire. In early 2007, Cahsens created a highly polished brochure and sent it to a buyer there with a request to meet. She agreed, later telling Cahsens she’d never seen such an impressive brochure in this category. At the meeting, Cahsens easily won over the buyer and her assistant.

In fact, by lining up component suppliers and a contract manufacturer before the Canadian Tire pitch, Cahsens pre-empted a question that triggers the downfall of many product designers who lack manufacturing assets or experience: how can we be sure you’ll fill our order on time?

The buyers liked the Zipfy’s durability, peppy colours and invigorating yet safe ride. They suggested ordering 10,000 units, to retail for $39.99, in return for a one-year exclusive among big Canadian retailers. Cahsens, knowing the order would take him past break even, happily accepted.

Only with the order in hand did Cahsens invest $50,000 in a production mould and a mass mailout to Canadian Tire dealers, with action shots of the Zipfy and text about its features and benefits. Next, he shipped $100 custom display racks to the stores, urging dealers to spur impulse buys by putting the eye-catching Zipfys in with the Christmas decorations.

It’s rare for a product supplier to market to individual stores, says Cahsens: “But I went to such great lengths because it was a new product and I wanted to do everything I could to make it succeed.” His efforts paid off. The sleds sold quickly, and dealers later told Cahsens the racks were crucial to that.

This early success gave Cahsens a great story to tell other retailers, helping him secure distribution through Costco and Toys “R” Us, with their huge reach among families. “My No. 1 demographic is grandmothers and mothers who buy sleds for the kids,” says Cahsens. Great Circle Works widened its appeal in September by launching the Zipfy Junior—a smaller model with cartoonish eyes—for kids ages four to six.

Great Circle Works has cultivated other niches. It has gotten the sleds into unorthodox venues such as Bath Bed & Beyond, Olly Shoes and Chapters Indigo. And it sells to Japanese ski resorts that rent Zipfys to non-skiers from Taiwan happy to try a winter sport they don’t need lessons for.

Extreme-sports enthusiasts have adopted Zipfys on their own, using them to bomb down mogul runs, summer ski ramps and back-country deep powder. Cahsens is encouraging growth in this niche by posting on the Zipfy website users’ photos and videos of their less crazy pursuits.

Late last year, Cahsens decided the Zipfy’s phenomenal success was no longer enough. Retail buyers started asking what else his firm had for them, he says: “By the third or fourth time, the pressure was on.We had to deliver.”

As he pondered diversifying, Cahsens reasoned that selling more than one product would stabilize the business and leverage its huge asset of relationships with retailers worldwide. By then, he had streamlined his operations so thoroughly—he outsources everything except product design, sales and marketing—he had time for new ventures. And, because he outsources production, Cahsens can enter new categories without having to invest capital.

Besides, it would be fun. “It’s an extra challenge, which I welcome,” he says.

Cahsens’ sister inadvertently turned his musings into action last Christmas, when she gave him a book on 100 new industrial designs. Cahsens was wowed by “this beautiful, beautiful toy”—a sort of Rubik’s cube of spheres within spheres. Before the day was over, Cahsens had Goog­led the designer, a recent grad in industrial design from Croatia’s University of Zagreb, emailed him and confirmed the design hadn’t been commercialized. Cahsens soon negotiated global rights to the Oblo (Croatian for “sphere”) and contracted a Toronto-area manufacturer to produce it. In August, he launched the $29.99 3D puzzle at retailers including Mastermind Toys and Chapters Indigo.

As with the Zipfy, Cahsens
didn’t invest beyond a prototype until he had a purchase order. He does this each time out, diving boldly into a new market but carefully limiting the potential downside. Cahsens says, at any moment, he risks no more than 5% of his revenue on new products—then laughs: “Gee, I should take more risks!”

He also guards against another kind of risk: leaving money on the table if an item becomes a hit. Cahsens’ products have big economies of scale—to maximize profits, he must maximize volume. To ensure against running out of inventory, he avoids lower-cost manufacturers that can’t ramp up fast. Where possible, he uses North American manufacturers close to his clients so they can resupply quickly.

Such tactics don’t eliminate the perils of diversification. The firm risks a high flop rate if it enters categories so disparate it can’t apply learning from one category to others. This raises the question of how divergent these categories will prove to be.

“Truthfully,” says Cahsens, when asked how he picks new products, “it’s whatever turns me on.” But, he swears, there’s plenty of common ground. All the products are toys or sporting goods with vibrant colours and clever design. His firm’s tag line sums this up as “Playful products, smart design.”

To reflect his firm’s diversification, in May, Cahsens renamed it Great Circle Works. As he explains it, a “great circle” is the shortest path around a sphere, and he aims for the shortest path between producer and consumer; “works” is an older term for a factory. “The Great Circle Works brand sits in the background,” he says. “It’s subtle and soft-spoken.”

However, this strategy surrenders any leverage to be gained by associating individual products with a singular, strong brand, says Becky Reuber, a strategic management professor at the Rotman School of Management in Toronto. She also warns about a potential loss of focus as the firm manages a growing number of dissimilar products.

Still, says Reuber, Great Circle Works is taking fewer risks than it seems. It’s exploiting its relationships with retailers, and “the more these products can share channels, the easier it will be.” Reuber applauds the idea of investing little in a product until a buyer places an order, rendering market research unnecessary. “And if he’s doing it all with affordable loss in mind,” she says, “that’s much less of a risk.”

Cahsens, believing he has limited the dangers, feels free to chase whatever catches his fancy. When a friend told him about a colourful watch she had seen in Italy, he tracked down the Korean inventor and made a deal to tweak, rebrand and launch the watch in markets as far-flung as North America, Japan and Norway. The $9.99 rubber-silicon Oggi (Italian for “today”) is more a fashion accessory for teens and young adults than a functional buy.

Next up: a low-maintenance, single-gear $160 commuter bike called the tütsl’ (German for nothing in particular). Cahsens got the idea when he went shopping for a commuter bike and found those on offer to be pricey and way too complex. He plans to pitch his retro two-wheeler to retail buyers this fall, for a launch next summer.

Expansion is forcing Cahsens to add to his tiny workforce of four full-time equivalents. He admits he may have taken the lean approach too far, and may triple his staff once he reaches 10 products.

But maybe not. With no investors pressuring him to fulfil a grand plan, Cahsens can change direction at will. “I focus mostly on today,” he says. “That helps me be satisfied with every successful year, as opposed to being disappointed that I didn’t hit a certain lofty goal.”

Cahsens says he may sell his company down the road: “But, on the other hand, I might continue the business on my own for many, many years.” The only safe prediction about what Cahsens might get up to next is that it could be anything.