Time to Take the LEAP

Time to Take the LEAP

Convert Ideas to OpportunityIdea Generation, Evaluation, and Implementation Workshop

February 29, 2012

Generate Ideas Evaluate Options Plan for Business Develop a Budget Identify Funding Alternatives Explain Startup Process Q&A

Agenda

Why Didn’t IThink of That?

Generating Ideas

YOU◦ Internal Proficiency & Passion

Acknowledge your genuine interests and true passion Take stock of your professional and personal resources Consider your entrepreneurial characteristics and aptitude

OTHERS◦ External Observations & Behaviors

Solicit input from business associates, vendors, suppliers, customers

Converse with new/different people and general public Be original Observe social behavior and pay attention to ordinary living

Zoom In on Ideas

SURROUNDINGS◦ Situations & Response

Question wisdom of continuing habitual responses Explore familiar surroundings, similar circumstances

or advanced areas Break your routine Tweak the existing

EXPECTATIONS◦ Attitude & Outlook

Break the rules Explore your intuition Reexamine failure and accidental results

Zoom Out on Ideas

Immerse Yourself Specific Information General Information Sources Demographics & Trends

Search Multiple Sources& Fact Check

Have Lots of Ideas Method of Capturing Be Open Build on Ideas Multiple Solutions Simple Don’t Judge Become a Collector

Generating Ideas

The question is not what you look at

but what you see.-Thoreau

Finding the Needle in the Haystack

Evaluating Options

Answer These Basic Questions:◦ How does idea solve problem

better than alternatives?◦ What will competition do in

response to idea?◦ What proves idea is technically

feasible?◦ What prevents copying idea and

permits your legal use of idea?◦ How will competitive advantage

be sustained?◦ What external factors must you

consider?

Determine Your Destiny!

Understand Why Trends Occur Acknowledge Intuition, but Support with

Data Make Fact Based Decisions Recognize Learning, Adapting, and

Improving easier than Complete Revolution Avoid a Poor Choice and Survive Consider Passing on to Someone Else Be Patient and Persistent

Idea Assessment Guidelines

http://www.youtube.com/watch?v=HpvEF_GIhmw

Idea Evaluation Exercise

Now What?Planning for Your Business

ModelMarket

ManagementMoney

MARGIN

Motivation

Major Factors to Consider

the method, approach, or system that will be used to obtain money for your products or services

Your planning for Business MODEL should: ◦ Describe product(s)/service(s) and

bundles/packages developed to produce revenue streams.

◦ Project frequency and quantity of customer purchase for each revenue stream.

◦ Explain strategy for maintaining proprietary information and competitive advantage.

◦ Clearly communicate the type of business - manufacturing, wholesaling/distribution, or retailing.

MODEL

Whatever you think your business model is when you start, you are wrong.

Colin Angle – Co-founder and CEO of iRobot

Why Model Matters

Customer Issues with Current Solution Benefits of Proposed Solution Evidence Yours is Preferred Magnitude/Seriousness/Cost of Problem Ability to Protect Idea (IP)

More About Your Business MODEL

the people or organizations that will pay for your product or service

Your Planning for MARKET Strategy Should:◦ Describe target market(s) and specific market

segments most relevant for your enterprise.◦ Numerically quantify the addressable (initially feasible)

target market size for each revenue stream.◦ Estimate unit sales logically justified for each revenue

stream - monthly for year 1 and qtr/yr for years 2 - 5.◦ Explain introductory and LT/continuing sales strategy.◦ Clearly explain whether B2C, B2B, or B2G.

MARKET

Why Market Matters?

http://www.youtube.com/watch?v=8bVblNA3drM&feature=related

Identify Initial Market – Demographics & Psychographics

Include Future Market Opportunities Estimate Sales Support Current and Future Sales with

Evidence Compare to Alternatives – Chart with

Significant Purchase Decision Factors

More About Your MARKET

the amount of profit your business will generate to keep the founders motivated, to repay the investors, and provide for growth

Planning for Your MARGIN Should:◦ Project cost of goods sold: estimate raw material and

labor cost to produce a unit/bundle.◦ Establish prices for proposed units/bundles for each

revenue stream.◦ Establish projections for revenue (price per unit * unit

sales) - preferred to market share percentages, OK to validate projections through market share estimates.

◦ Understand basics: Sales Revenue – Cost of Goods = Gross Margin – Operating Expenses = Profit

MARGIN

Why Margin Matters

Know Price and Profit of Similar Products/Services

Detail Material and Labor Costs Justify Cost Estimates with Actual Quotes Compare to Industry/Competitors Anticipate Impact of Competitor Response

and Cost Fluctuations

More About Your Margin

the group of people with talent, experience, and commitment to start and run the business

Planning for Your MANAGEMENT Team Should:◦ Establish hiring priorities by determining what needs to

be done, then group common tasks into “jobs” or around people/founder(s) strengths.

◦ Identify the tasks that can be contracted/outsourced.◦ Project staffing budget.◦ Build advisory team to supplement existing

capabilities and fill gaps.

MANAGEMENT

Why Management Matters Apple and Steve Jobs

◦ 1971 – Apple established◦ 1985 – Jobs was asked to resign◦ 1996 – Jobs returned◦ 1997-2011 – Jobs CEO

Emphasize What is Needed More Than Who is Available

Plan for Future as Well as Present Develop Structure and Documentation Budget (and Incentivize) to Attract Talent Consider Founders, But Act for

Survival/Success

More About MANAGEMENT Team

the resources, financial and otherwise, that are required to start and operate the business

Your Financial /MONEY plan Should:◦Project revenue - monthly for initial year and

quarterly/annually years 2 - 5.◦Project cost of goods - monthly year 1 and

quarterly/annually years 2 - 5.◦Project operating expenses - monthly year 1 and

quarterly/annually years 2 - 5.◦ Identify potential sources of funding/financing for

the venture.

MONEY

Why Money Matters

Quantify value of current investment in venture

Estimate cost of pre-venture and startup needs

Document assumptions for all estimates Create basic cash based budget Prepare what-if scenarios integrating

contingencies

More About MONEY

the passion and inspiration that compels the founders to persist against incredible odds and tremendous obstacles

Your Plan for MOTIVATION Should:◦ Establish timeline with measures of success for

major steps - investment needs, hiring, product/service introduction, sales levels, break-even, exit.

MOTIVATION

"Success is a lousy teacher. It seduces smart people into thinking they can't lose.“◦ Bill Gates

Why Motivation Matters

Document Meaningful Outcomes Achieved Remember Factors Compelling Launch Describe Personal Rewards Expected Know Your Preferred Business Exit Scenario Define Significant Next Steps Along with

Resource Needs Demonstrate You Have “skin in the game” Anticipate Obstacles/Challenges Related to

Commitment of Founder(s) and Key Mgt

More About MOTIVATION

How Much Do You Need?

Developing a Budget and Identifying Funding Options

#1 Establish Cost of Goods #2 Calculate Potential Revenue Streams #3 Determine Potential Business Revenue Anticipate Operating Expenses Estimate Profit Potential

Developing a Budget

Cost of GoodsSimple Estimate for Cost of Goods Sold per Unit*

step #1List Materials/Component Parts, Shipping, Packaging and Cost Labor Hours and Hourly Wage Rates1

1 ____________________________________ $ __________ for _____ minutes @ ______ $/hr $

2 ____________________________________ $ __________ for _____ minutes @ ______ $/hr $

3 ____________________________________ $ __________ for _____ minutes @ ______ $/hr $

4 ____________________________________ $ __________ for _____ minutes @ ______ $/hr $

5 ____________________________________ $ __________ for _____ minutes @ ______ $/hr $

6 ____________________________________ $

7 ____________________________________ $ Total Hourly Labor Cost $

8 ____________________________________ $ Estimated Labor Burden (use 30% if unknown) +

Total Estimated Material Cost $ Total Estimated Labor Cost $

Calculate Estimated Unit Cost

Total Estimated Material Cost $

Total Estimated Labor Cost $Total Estimated Unit Cost $

Establish Potential Sales Price and Gross Profit for a Unit

Using Your Information: Using Industry Information2:

Proposed Price3 $ Estimated Unit Cost $

(less)Estimated Unit Cost $ (divide by)Industry Cost of Goods as % of Sales %

Potential Gross Profit per Unit $ Potential Price per Unit $

Revenue StreamsInitial Assessment of Potential Sales/Revenue for a Product/Service or Bundle/Package*

step #2Describe the Product/Service:      

Identify the Target Market Segment / Primary Customer(s):

Individual Consumer Goods: Institutional Goods:Age IndustrySex Type OperationFamily Size Organizational Size

Income AreaRent or Own Home OtherNeighborhood, City, Parish, State, Region, NationOther

Define the Market Size1:Number prospective customers in specified geographic area # _____________________________________

Estimate Purchase Patterns for: product, service or bundle/package (please specify)Average price per purchase2 $ ________________________Number purchases per year3 # ________________________

Calculate Total Potential Sales for Market SegmentCustomers #(multiply times) Price $(multiply times) Frequency #

EQUALSPotential Annual (or other specific period) Sales4 $

Business RevenueInitial Assessment of Potential Sales/Revenue for THE Business Venture*

step #3Calculate Potential Annual (or other specific period) Sales for ALL Revenue StreamsList Each Product, Service, Bundle/Package Revenue Stream and the Potential Sales for Each (during the same, specified time period) 1

1 ____________________________________ $

2 ____________________________________ $

3 ____________________________________ $

4 ____________________________________ $

5 ____________________________________ $

6 ____________________________________ $

7 ____________________________________ $

8 ____________________________________ $

9 ____________________________________ $

10 ____________________________________ $

11____________________________________ $

12____________________________________ $Total Potential Sales per specified time period $

(times) # time periods required to equal 1 year

Total Potential Annual Sales for Market $

How many others in the area also supply this market? List Competitors

1 ______________________________ 6 ______________________________

2 ______________________________ 7 ______________________________

3 ______________________________ 8 ______________________________

4 ______________________________ 9 ______________________________

5 ______________________________ 10 _____________________________

Determine Potential Sales for an Establishment

Using Your Information: Using Economic Census Information2:

Potential Sales $ Sales for Your Industry Segment within Area $

(divide by) Number Competitors #(divide by) # Establishments in Segment in Area #

EQUALSPotential Sales per Establishment $ Average Sales per Establishment within Area $

Sales per establishment (divided by) 12 = Potential Sales / Month $ $

Loans◦ Guarantees, Microlending

Savings/Retirement Friends/Family Crowd Funding 2nd Job/Sideline Biz Advance Sales Investors Grants

Funding Options

Where Do You Start?

Understanding the Startup Process

Forms of Organization Choosing a Business Name Federal Registrations State Registrations Local Registrations

BASIC STARTUP PROCEDURES

tbdc.latech.edu/

Google DocsGoogle Groups:

LA Tech TBDC Network

TBDC Facebook Pagefacebook.com/LATechTBDC 

You’re Not Alone

Kathy Wyatt, DirectorTechnology Business Development CenterLouisiana Tech UniversityP.O. Box 3145, Ruston, LA 71272Phone: (318) 257-3537Fax: (318) 257-4442Email: [email protected]

Questions?

Take the Leap