Big Idea Competition, Reflections of Day 3

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BeDifferentThe focus of tonight’s lab session was on the business model. Not the business plan, not the business concept, but something kind of in between.

As a refresher, the business plan is the full detailed document split up across about a dozen sections that is your “best guess” of how you will run every aspect of your business.  It’s pretty detailed. The business concept is not your tangible product or service, but the value you create. A lighting company’s product is lights and chandeliers, but their business concept is selling ambiance, mood, effecting the environment. You should be able to state your business concept in 6 words. And the first two are “We sell”.

So what is a business model? A business model asks 6 questions:

  • How do you create value?
  • Who do you create value for?
  • What is your internal advantage?
  • What is your external differentiation?
  • How will you make money?
  • What is your growth plan?

Let’s break those down, starting with “How do you create value?”

How do you create value? 

This might sound straightforward; you sell things. But the question doesn’t ask how do dollars get in your bank account, the questions is about creating value. Within your product/service mix you will find you have breadth and depth across your product lines.

The breadth refers to the kinds of products you have. So lets say you operate a simple dive shop and you have the following products:

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Each of these is a revenue driver, and independently contributes to the value you create.  The next concept is depth of your product mix, these are your unique offerings within the product lines. They can high-end or low-end variations, service contracts, rentals, etc… the more creative you get with the depth, the more opportunity you have to create value. Let’s put that into our breadth model and see how it looks.

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But what if you only have one product because you are a start-up based on a new gizmo? Add depth to that one product. Do so through a warranty or service contract, tech support, additional supplies or accessories to compliment it. Again, the more creative you can be, the more value you can create.

Who do you create value for?

The more you understand your customer and the buying cycle, then the better you can sell to them. Create a picture of the kinds of market segments you will be selling to, and you will knock this out of the park. Draw your ideal customer, take a picture of one, and get in their head. What steps to they take from becoming aware of your product, become interested, desiring the product, and lastly purchasing that product. Are your sales based on quick transactions or does your customer need a relationship with you or your sales force?

What is your internal advantage?

What are the capabilities your business has that are unique to you? If you had one extra dollar to spend on your company, where would you spend it? What makes you excellent? This is about you and your people. If everyone in your industry had the same resources, what internal capabilities are your strongest?

What is your external differentiation?

Differentiation compliments your internal advantage – externally. If your internal advantage is people skills, this might translate externally as a fantastic customer service department. If the internal advantage is marketing, then we should expect to see a pretty sophisticated marketing section.

How will the firm make money?

The basic question here is about volume and margins. The example in the lab was on college bars. A college bar can sell 25-cent beers all night by packing the bar to capacity and selling as many beers as they can as fast as they can. Whereas if you were to go to swanky hotel lounge, the same beer might be going for $7, and they expect you to order maybe one or two an hour. The key difference here is in high volume/ low margins vs. low volume/high margins. What are yours?

What is your growth plan?

Where is the company in 5 years? Are you expanding, selling, IPO? Sometimes this is called a speculation plan, because it is your hopes and dreams of your company’s future.

Good luck! To keep up with us live-tweeting the labs follow us on Twitter at www.twitter.com/ufcei.

Big Idea Business Plan Competition, Day two

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entrepreneurshipThe second day of lab for the Big Idea Competition was full of excitement! Everyone walked in the room, and the air was electric. Dr. Morris opened the floor for questions before we began and a theme was clearly apparent. Each question was dancing around information; specifically what information is revealed when? And frankly, this is something you will see in every business class, pitch competition, and networking event. Entrepreneurs all have a little bit of self-infatuation. You need to have some to believe in yourself. And they believe that their idea for a business is the greatest one ever and it is going to change the world. And they are scared that you will steal it.

First of all, no one is going to like your idea as much as you do. While you may have the next world-changing gizmo, it really isn’t worth it to me to run with your idea and pass it off as my own. Ideas are easy; execution is hard. You should be confident that you can and will work harder on your idea than anyone else. You can’t measure passion, and you can’t beat it either.

Furthermore, this is a business plan lab. We are here to workshop sections of our plans. If you don’t bring in anything to workshop, you won’t be getting any better.  So participants are encouraged to share early and often.

Next we were asked, “What is the hardest part of the business plan to write?”

Nearly everyone said financials. That’s wrong. The answer is actually the Market Analysis. We want to see how well you know your customer. We know you know your product, that’s easy, but how well do you know the customers, their buying cycle, the suppliers, the distributors, and your competitors? The clearer you can convey that, and then much of the plan will fall into place. Now you might be wondering, where do I find such wonderful information? First, go out there and talk to people. Talk to customers and competitors and don’t be shy.

For information on the industry go to the library, librarians will love to help you do research. Seriously, it’s their job; you’ll make them happy to help you.  Also check out NAICS. This is the detailed data that will blow your socks off with information about business patterns and define your industry.

Lastly we discussed what a business concept is.  We used a dessert bar as an example. You may think they sell tiramisu, éclairs, and cakes. And while that is an accurate description of their products, it doesn’t capture their concept. A dessert bar sells indulgence. They sell you a chance to spoil yourself with rich flavors and delightful tastes that you know are bad for you.

I have a friend who has an event lighting company. He thought he was selling lights. I told him he was wrong. He sells ambience, he sells the mood, he sells the environment.  When you structure your business concept around the value you bring customer, the products will sell themselves.

Do you have a business concept? Need help figuring it out? We are here as a resource. Contact us directly or leave a note in the comments.

Big Idea Business Plan Competition, Day One

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The common denominator between everyone competing in the Big Idea Competition is that we all have a dream. Not an idea, a dream. I know how that sounds given the title, but bare with me. We all have a dream to do great things, become successful, win first place, etc… The lab is designed to help you turn that dream into a reality by guiding you through the organizational process of our business. When Dr. Morris was lecturing I was reminded of a conversation I had at a place I used to work. An older and successful doctor asked me what my plans were. I told him I was going to start a Masters degree in Entrepreneurship. And he responded saying, “Why would you ever get a master’s in that? Aren’t you supposed to just go and try, and fail, and fail, and fail some more until you get it right?”

You can do that. You can go ahead and throw crud on the wall and see what sticks. You can make appointments with bankers to try to get financing relying solely on your wit and charm. You can put out a product and pray to whatever deity you prefer that people will buy it. You can do whatever you want because you live in the greatest time in history to start a business, where people are finding solutions to problems we didn’t know we had, and you can do business with almost anyone anywhere in the world! You can do all of those things, but here’s what you should do.

You should write a business plan. You should use that writing process to thoroughly vet your idea. You should evaluate the value of your ideas. You should figure out how to make money. You should formulate all the ways to make your ideas operational.

The business plan brings discipline, order, and logic to your thinking. The business plan can help you recruit talent. The business plan will help you get financing.  People who give you money expect to see some proof that you can deliver. The business plan is your best guess of how you will make a return on their investment.

I’ll leave with you with one story. I recently, no more than 4 months ago, had coffee with a local ‘entrepreneur’. He had just launched his website and was already getting orders for his product. He was telling me his ‘entrepreneurial story’ and said that he’d been writing his business plan for months until a friend told him to throw it out and start working.

He is no longer in business – crashed and burned in the span of 4 months.

A business plan will guide you through all of the decisions you are going to have to make. Being in a lab or having mentors or friends review your plan will punch holes in your plans where you didn’t know any existed. Professor Rossi says, “You need someone to tell you that your baby is ugly!” Dr. Morris says, “To be successful you will need to develop some thick skin.” It is a long and hard process, but it will be worth every edit and revision you make.

To see more on the Big Idea Business Plan Competition check out http://warrington.ufl.edu/centers/cei/bigidea/ and view our web series on the competition on our YouTube channel. And follow along on Twitter with the hashtag #UFBigIdea.

*Much of the content of this post is inspired by Dr. Morris’s lecture at the Big Idea Competition.