Eric Savage hopes to make some real money with virtual reality.

Through his company Visual Dynamics, the Colorado Springs entrepreneur wants to create virtual tours of resorts and museums that can be viewed either on the Internet or on CD-ROM. The interactive multimedia tours would allow viewers flexibility not available with other media.

"This allows the viewer to walk themselves through the property. On a Web site, you would have to click through half a dozen places," said Savage, who is founder and president of Visual Dynamics. "With this, the viewer can go anywhere."

Savage plans to use Apple Computer Inc.'s Quicktime VR software to create the virtual tours, which could run on computers using either Windows or MacIntosh operating systems. Visual Dynamics would coordinate production of the tours.

The interactive multimedia market remains small - Visual Dynamics' business plan cites Cahners Industry Group Research Services statistics putting worldwide sales at $210 million in 1997, up 34.5 percent from the year before. More current market estimates are not included in the plan.

According to the company's plan, most major virtual-reality multimedia developers are focusing on the gaming and education markets, creating an opportunity to target niches like the resorts.

Only a handful of small companies are targeting either the resort or museum multimedia market, and none are pursuing either market full time, the plan says. Visual Dynamics initially plans to target regional resorts and museums for its product.

Savage spent 10 years as a media production specialist with Lockheed Martin Corp. in Denver, producing training films under government contract. He also spent five years as media services manager for Kroy Inc. in Scottsdale, Ariz.

Visual Dynamics is seeking a $100,000 investment for marketing and sales expenses, salaries, and to buy computer, video equipment and software. The company's plan calls for it to either buy back investors' stock within five years or go public.

The company projects earning nearly $60,000 on sales of $240,000 in its first year, growing to nearly $300,000 in profits on $900,000 in sales by its fifth year. Up to five employees would be hired.

Evaluators for the Visual Dynamics plan included Joshua Alspector, electrical and computer engineering professor at the University of Colorado at Colorado Springs; Lex Higgins, associate professor of marketing at CU-Springs; and Bill Petro, senior director of business development for USA.Net Inc.

The volunteers said the Visual Dynamics plan had a professional look and includes a detailed list of potential customers for its products, but the plan lacked detail in many areas and indicated a rather small return on investment for a start-up business.

THE EVALUATORS

Joshua Alspector is a professor of electrical and computer engineering at the University of Colorado at Colorado Springs, where he also holds an endowed chair in information technology.

Before joining the faculty in 1995, Alspector headed a research group on semiconductor technologies at Bellcore, the former Bell Laboratories in New Jersey, where he worked since 1978. Prior to that, he pursued a physics career at Rutgers University and Brookhaven National Laboratory.

Lex Higgins is an associate professor of marketing and creativity at the University of Colorado at Colorado Springs and is director of the school's Center for Research on Creativity and Innovation. Before joining the faculty, he was a marketing and creativity consultant to many U.S. corporations, including Hewlett-Packard Co., Fluke Corp., Microsoft Corp. and McGraw-Hill Cos. He holds a doctoral degree in business from the University of Colorado and master's and bachelor's degrees from Murray State University.

Bill Petro is senior director of business development for USA. Net Inc., a Colorado Springs-based provider of Web-based electronic mail and the world's largest e-mail outsourcing firm. Before joining USA.Net, he spent two years as marketing manager for DMW Worldwide of Colorado Springs and 11 years with Sun Microsystems Inc., most recently in the international marketing group based in the Springs. While at Sun, he helped to launch the company's Java technology worldwide.

THE EVALUATIONS

Alspector's evaluation:

I liked the detailed plans to promote the company through trade shows, public relations and other marketing methods, and the estimates on the market for interactive multimedia products were interesting.

Much of the business plan was vague; more detail is needed on product development, competition and business risks for potential investors. Eliminate the motherhood and apple pie statements like "create an optimum product yielding the most benefits."

This is a one-man company seeking a relatively small amount of money. It actually is more difficult to get a small amount of money than it is to get a larger investment because a small investment target may indicate small ambitions.

While it seems reasonable that there is limited competition in the market for creating multimedia presentations for resorts and museums, I'm not sure that's much of a competitive advantage.

From an investment standpoint, a 20 percent annual return is not very attractive. Investors typically want a 40 percent to 50 percent return from a start-up company. The financial statements should be backed up with the assumptions and risks associated with the projections.

At more than 50 pages, the plan is too long and should be shorter and more to the point. The content is repetitive and includes numerous spelling mistakes and typographical errors that need to be corrected.

Higgins' evaluation:

The plan is very attractive, but I have some reservations from a marketing perspective. While the plan defines the customer profile from a theoretically intriguing perspective, a marketing professional would have a challenging job.

More market research is needed to identify the correct standard industry code for the markets the company is targeting. Then, find sales forecasts for that industry in sources like Predicast and others.

While the customer profile is interesting, the plan needs a dependable sales forecast and summary of what target customers must go through before adopting this technology.

The marketing-mix portion of this plan is too general and needs to be more focused and include a timeline that shows the who, what, when, where, why and how of the company's initial distribution and promotion efforts.

The plan needs to be rewritten to show that the company's basic business objective is market driven rather than driven by technology and sales. It is important to realize that technology does not sell, so the company must clearly demonstrate the benefits the product will provide to target customers.

Petro's evaluation:

The plan was a delight to read. I liked the tone and appearance of the document, but I agree that the plan lacks some critical details.

I had trouble determining whether the company was offering a product, a service or both. I finally found deep into the plan that the company is delivering a service with a piece of software. Investors want the cookies within easy reach. Whether the company is offering a product or service affects its valuation, its exit strategy and many other factors investors consider.

The advantage of being a one-man show is that it gives you maneuverability, but the drawback is that you have to wear all the hats. It appears your background is strong in graphic design and management, but investors are going to look for strength on the sales and marketing side. You may need to hire someone in that area.

You need to be more clear about your delivery mechanism. The plan only hints at distributing this product through the Web.

While you mention your target customers, you don't really give the status of your sales efforts with those customers. You need to show that very clearly.

What is the competitive advantage your company offers? I could not determine whether the advantage was price or that your company is smaller and more flexible than its competitors.

I agree that the niche is lucrative, but you also need to show investors the barriers to entry. If you are successful, can competitors come into the market and squeeze you out?

Contact Visual Dynamics:

Call 572-1362

U.S. Mail 4631 Hotspur Drive, Colorado Springs 80922

Next week: Small Business Development Center.