Her business, The Inner Tube, was born when she undertook a project on recycling while studying art, design and media at Portsmouth University. She discovered that most discarded tyre inner tubes are buried in landfill sites and resolved to find a use for them.
Inspired by the way in which people in developing countries use old inner tubes to make products ranging from water carriers to shoes, she identified a market among fashion lovers for rubber bags and luggage. The results are the distinctive plant-shaped rucksacks and other bags seen on high streets across Britain.
Two-and-a-half years after starting the business with the aid of a pounds 2,000 loan from the Prince's Youth Business Trust, she is producing 200 bags a day and selling them to designer shops as far afield as New York and Hong Kong. It is a performance that has made 25-year-old Ms McDonagh a finalist in the Shell LiveWIRE competition to find the 1999 UK Young Businessperson of the Year, which will be decided at a gala event in London on Thursday.
Not that it has all been plain sailing. Ms McDonagh points out that the Prince's Youth Business Trust and her Shell LiveWIRE adviser were about the only people who took her seriously. And she had to sell her car to help get the business off the ground.
Now, operating from a factory unit at Hambrook, near Chichester, she has subcontractors collecting and cleaning inner tubes while others make a range of products that includes bikinis, mirrors and personal organisers as well as the original bags.
In the past year, she has defied the strength of the pound by gaining 60 per cent of sales from overseas and now intends to raise her profile in Britain.
Hers is just one of several design/lifestyle businesses in the finals of the annual Shell-sponsored competition that carries a pounds 10,000 first prize. Among her rivals are a milliner who produces distinctive hats and a maker of high-quality silver jewellery.
Since being established in 1982, the LiveWIRE programme has given free advice to 140,000 would-be entrepreneurs aged between 16 and 30.