Building a Business Case

1. Building a Business Case International Association of Congress Centres Liverpool July 6th, 2010

2. What is a Business Case? • States a problem • Describes a solution • Estimates the cost to implement the solution • States the ROI that could be realized if the solution is implemented

3. Business Case Process Develop Assumptions 2 • Scope of Info • Predict • Simplify • Clarify Calculate Financial Impact 5 1 8 • IRR • ROI Determine Non-Financial Impacts Determine Benefits Summarize Results • Desired Outcomes • Needs 3 7 Define the Problem/Solution • Decision Matrix • Qualitative factors Sensitivity / Risk Analysis • Revenue • Cost savings from economies of scale 6 • Assumptions? • Structure? Determine Costs 4 • Operating • Capital

4. Underlying Realities • Convention centres don’t generate a direct ROI • Focus is on economic impact • The beneficiary often isn’t the funding source • Long-term (capital) $ vs. short-term (optg.) $ • No time value of money • Your problem may not be “their” problem • Or as big a problem as their other problems • Or as pressing as their other problems

6. The Vancouver Timeline VCEC Process Competitive Process B of T Task Force PPP Process Customer Focus Groups Broader Business Community Engaged Economic Impact #1 Economic Impact #2 Economic Impact #3 Business Case #5 Business Case #6 Business Case #1 Business Case #2 Business Case #3 Business Case #4 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Expansion Approved Vancouver gets Games Games Bid

7. What do we Know • Picture of VCC

8. You Don’t Need Perfect Info You do need: • Better information than anyone else • Basic event performance data: • Historical event performance • Turnaways (unavailability of size and dates) • Prospect/target list (not the telephone book!) • Basic financial performance data • Where are the opportunities: revenue and cost • Sometimes….the answer is NO!

9. Know Your Audience • The Bureaucracy • The Politicians • The Community at large • The Naysayers

10. Build Support

11. What’s the ROI from a Library? • Not all public spending needs to generate ROI • Convention Centres need to demonstrate: • Catalytic impact (hotels, retail, support) • Networking and industry/academic exchange • Leading by example • Civic pride “Cities were invented to facilitate the exchange of ideas, friendships, material goods and skills. How good a city is at facilitating exchange determines its health – economic, social, cultural and environmental. Public space forms a vital conduit…by providing platforms for everyday interaction and information flows – the basis and content for the life of cities.”

12. Timing is Everything • Opportunities: • A competitor city is expanding • A land parcel is available (time limiting) • A grant program • A community leader ready to get involved • An election • Barriers • A competing “project” • Budget challenges • An election

13. Public-Private Partnerships • A PPP can: • Raise limited capital (trade off revenue stream) • Encourage creativity (can also stifle) • Force trade offs (e.g., revenue, management) • Limit construction risk • Facilitate wider project support • A PPP cannot: • Easily adapt to revenue volatility • Make borrowing cheaper by the private sector • Make the project profitable • Make the project less complex (just the opposite)

14. A Picture’s Worth….

15. The Naysayers • "A Lot of Hooey“ • “Field of Schemes” • “Most of the feasibility studies are based on unrealistic assumptions and generate forecast numbers that are not likely to be realized.” Dr. Heywood Sanders

16. Conclusions • Core market and financial analysis is “table stakes” • Perfect information isn’t necessary • Know your audience • Build support gradually • Don’t forget the social/community benefits • PPPs can be useful in right circumstances • Timing is everything • Criticism is inevitable…stay focused on the solution

17. Q & A