The Nuts and Bolts of Business Plans Business...

The Nuts and Bolts of Business Plans

Business Models

Richard P Kivel

CEO

MolecularWare, Inc.

January 22nd 2004

6:00pm MIT

Richard Kivel - MIT/ IAP 2004 2

BackgroundCareer:

2001- Present - CEO, MolecularWare, Inc (company acquired in June 2003)

98-01- Director of Sales Interliant / NDA (company acquired Feb 1999)

96-98 - EVP, RentGrow Software, Inc.

91-96 - President, Advanced Security Technology ( company acquired Dec 1995)

Education:

American International College – BA

Boston College – MS

UPenn -- Advanced program in Genomics, Drug Discovery, Therapeutics

Other:

MIT 50K Entrepreneurship Competition, Mentor 96-98, Judge 1998- Present

Young Entrepreneurs Organization (YEO) Member 1994-Present

MIT Deshpande Center - Catalyst Program Executive

What is a Business Model

def: This is the method by which a firm uses its resources to offer its customers better value than its competitors and make money doing so.

It tells who pays, how much and how often.


Reality Check

28+ Million Firms in the U.S.

* 96% under $1 million in gross sales

* 3.6% $1-3 million in gross sales

* 0.4% $8-12 million in gross sales

-Most employ less than 50 employees.

* 17,000 $40-75 million in gross sales

* Only 2,500 companies do more than $500 million.

* 500 +- companies in the world do over $11 billion *Bottom Line Consultants, Richmond VA


The Right Ingredients

A Team with Relevant Experience

Market Size

Technology

Reasonable Projections

Competitive Advantage

Exit Strategy


Business Models need to measure:

Revenues

Cost

Profit

Which model do you choose...

Models depend many things including:

Stage of development of your business

Your Value Proposition.


3 Stages of Growth

Stage 1: Early Growth

Sales Driven

Flexible/Agile/Creative

Loose controls and procedures

Stage 2: Rapid Growth

Delegation

Operations Driven

Focus is internal

Stage 3: Late Growth

What used to work no longer does.

System become obsolete.

Lose touch with customers


Five Critical Growth Drivers:

1- Market Intelligence

2- Strategic Leadership

3- Clarity of Purpose & Direction

4- Strategic Planning

5- Infrastructure


Corporate Values and Business Models

Southwest -vs- Virgin Air

Wal-Mart -vs- Nordstrom's

Dell -vs- e-Machines

Piaget -vs- Swatch

Amazon.com -vs- The Mall

MobileStar -vs- RoomLinX

VirtualInk –vs- Smart Technologies


Different Models to EvaluateDirect Mass Media

Retail Telemarketing/ Phone Sales

Channels, Distributorsand Partners

Trade Shows and Conferences

OEM Channels Internet - Web


Three Examples of…

Direct

Distributors, Channels & Partners

Original Equipment Manufacturer (OEM)


Direct Sales

Positives:

High Contact

Customer relations

More Control

Multi Purpose

Experts in the field

Negatives:

Free Consulting

May not like rep or rep leaves

High Cost

Gains lots of company knowledge

Retention


Distributors. Channel, Partner Sales

Positives:

Cost of Sale is Low

Hands-off Sales

Exposure in new markets

Credibility

Competitive Edge

Negatives:

Up-front fees

No control

Distant clients

Performance

Technical Pressure

Require lots of attention and training


OEM Channels

Negatives

Competitor envy

Two way street

Or not

Technical pressure

Channel Conflict

Positives:

Prestige and Publicity

List Sharing

Royalties / steady revenue stream

Increase Market Presence

Technical Control


Others:

Telemarketing/ Phone Sales

Trade Shows, Conferences

Internet- Web

Retail

Mass Media

How do you know your

succeeding?

What do you measure?


Fort 500 $289k avg rev p/e

Small Biz $100k avg rev p/e

Microsoft $250k avg PROFIT!

Fort 500 $289k avg rev p/e

Small Biz $100k avg rev p/e

Microsoft $250k avg PROFIT!

What are the Value Drivers you need to measure?

Sales/Revenue

Profits, Gross or Net?

Rev per employee** (see above)

Rev per SQ foot

Billable Hours Utilization Rate

Closing Rate Sales Cycle Average Sale

Market Share Number of clients

Share Price


Re-Cap #1

Do you have the right TEAM?

What STAGE is your Company?

What MODEL is most common in your industry?

What does your customer VALUE?

What do you MEASURE?

Prepare for CHANGE!

Business Strategy


A Business Strategy needs to

address more then…

Revenues

Cost

Profit


Five Critical Growth Drivers:

1- Market Intelligence

2- Strategic Leadership

3- Clarity of Purpose & Direction

4- Strategic Planning

5- Infrastructure


Successful Companies have a Leverage

Point that allows them to leap past their

competitors!

Scalability

High Switching Cost

Speed

Pricing

Service


The Leverage Point Matters!

Amazon

RoomLinx

Boston Chicken

Jamba Juice

Match.com

AOL

Virtual Ink

Partnership w/ Distributors

Proprietary Technology

Speed via Franchise Model

Speed or lack of..

Network Effect

High switching Cost

Price Performance


Closing thoughts

The Right Team

Mentors

Advisors

Networking

MIT, MIT , MIT

No fear

Thank you!

Richard P Kivel

CEO

MolecularWare, Inc.

The Nuts and Bolts of Business Plans Business...

Documents

Transcript of The Nuts and Bolts of Business Plans Business...