University of Dayton Business Plan Competition

University of Dayton Business Plan Competition Showing Growth with your idea www.UDBPC.com

Why Judges like growth • Growth by itself is not a good (just ask any cancer cell) • But a good business idea can be shared with others, creating even more wealth for founders and investors • Sometimes it is like a gold rush—you prove out a concept, and that causes all sorts of people to prospect in your space. Staking out a larger area may be the smartest tactic for Survival

Four Growth Models • Replication Model • Scaling Model • Roll-up Model • Roll-Out Model

1. Replicability • Means the idea can be copied over and over without much problem • Doesn’t require great specialized knowledge on the part of local managers • Tends towards uniformity. • Replicability is inherent to franchising. • Document, document, document! • College based businesses are naturals for replication (4,000+ locations)

Making replication work • Remove yourself as the source of value-added—delegate to others • Identify aspects of plan that are unique, and protect them • Decide if uniformity or localization matter most (McDonalds vs. Old Spaghetti Factory) • Hire professionals who can train and equip the clones

Making Replication work • McDonalds has “Hamburger U”, where owners go to learn the McDonalds process. • McDonalds spends heavily on training to ensure consistent expectations from each store. • Managing cash flow is crucial—easy to grow into bankruptcy if not careful

2. Scalability • Similar to replicability, but it means that adding new sales is actually cheaper. • High fixed costs, low variable costs. • E-Commerce is really a scaling business model: just add blades to the server farm. • If a unit requires your personal sales ability, its scalability is very limited • Automation often means a business can triple in sales without needing to add employees.

Dangers of a scalability growth model • Leads to tremendous price pressure when competition enters a market • Fiber optics lost $100 billion based on price war over a highly scalable product. • Barriers to entry are fewer, and resource endowed competitors can invade your market.

Scalings “Element of surprise” • Scalability is often a model which works best when “get big fast” is not a requirement • If in proving out the concept you invite in competition, success can be very limited because competitors enter the market

3. Roll-up (Probably the weakest one for the UDBPC) • An acquisition model, where you buy local “Mom and Pop” outlets, and convert them into a chain. • Primarily retail or service. • Two styles: uniform and localized • It isn’t you are buying growth, you are buying quick market entry. • Funeral homes, florists, etc. make good roll-ups. • (so does Frisch’s Big Boy).

Challenges to making Roll-Ups work • Capital intensive—major start-up costs • Need to do “due diligence”—this can go bad ugly if you buy too rapidly • Culture clash—can the management accept the changes you are making • Non-competes—can the owner become a competitor?

Benefits • Economies of scale—buying bulk to save money • Developing an advertising awareness • Buying stable cash flow can lead to future expansion • Good training opportunities

4. The Roll-out (Get big fast) • In many ways is the opposite of a scalability model

The Roll-out • Get large fast, immediate national scale businesses • High risk, because the costs of going national are so high • FedEx is a successful example of this • Webvan is a failed example of this

Roll-Outs require seasoned management • There really isn’t time for a “dress rehearsal”; you have to get the concept right the first time • Technology often falls into this category– can you just sell an iPod to a part of the market? • High up-front costs often create valuable barriers to entry.

University of Dayton Business Plan Competition