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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

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University of Dayton Business Plan Competition

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

  2. 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

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

  4. 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)

  5. 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

  6. 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

  7. 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.

  8. 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.

  9. Scalings “Element of surprise” • Scalability is often a “real options model” which works best when “get big fast” is not a requirement • If in proving out the concept you invite in competition, success is very limited (your competitors write an option on you)

  10. 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).

  11. 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?

  12. 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

  13. Example: John Deere • I worked with an entrepreneur who wants to roll-up John Deere franchises • Bulk orders save on shipping costs • Spread advertising across several stores • Many employees can be shared across stores • Inventory can be shared across stores • It looks very lucrative

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

  15. 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

  16. 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.

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