Business Plans

by

Professor Ron Fournier

September 27, 2010

What exists today: A current prototype:

Design Inputs:The current prototype will work, however it’s not optimal either.

Needs to:-work with all sizes of shells-be adjustable without having multiple tips-work with current handles, liners and shells -work with ceramic and metal liners only-work with misaligned liners and flush liners-extract liner without damaging the cup-be easy to assemble with wet gloves; ergonomic and quick to use-be easy to get through a small incision-be sterilizable and biocompatible-allow clear visualization of the acetabulum-be robust –may not be used as intended

Nice to haves:-as little assembly as possible-works with the Duraloc cups-works better than the current prototype

Developing the Business Plan

• The culmination of a lengthy, arduous, creative, and iterative process– Transforms the caterpillar of a raw idea into the

magnificent butterfly of opportunity– Articulates the merits, requirements, risks, potential

rewards, and execution• The point of departure for investors to begin

their due diligence– i.e. Balance risks and potential of the opportunity– The risks involve technology, market, management,

competition & strategy, financial

Developing the Business Plan

• The blog will have a PDF file on THE BUSINESS PLAN

• Use this as your guide• There is a sample plan for the PC Build

venture that we will discuss in today in class

• Also there is an outline and discussion of what to include

The Opportunity - PC Build• Manufacture and sale of PC computer kits

– target the home hobbyist & educational institutions, target folks “that want to get their hands dirty”

– unique opportunity to provide PC kits at affordable prices

– target those who love to experiment and learn, not necessarily saving money

– big guys like Apple and Dell switched to providing finished products rather than kits

– little or no competition in this area

Opportunity Rationale• 3 main reasons for the opportunity

– technological standardization• PC clones the standard for hardware and OS• free engineering, kits lag leader by one generation

– changing consumer attitudes• PC’s are everywhere• consumers not brand loyal• PC’s no longer a mystery• consumers adding peripherals themselves

– market opportunity• kit segment not being served with quality

The Product

• PC clones in a kit form– 30 day money-back guarantee– 3 main products (see pp54 and 55)– priced 10-15 % below comparable fully assembled PC’s– lag leading edge by 1 generation

• proven hardware• easy access to suppliers• recognized standard• lower cost components

• customer buys to learn about computers, not to buy the leading edge technology

Market Entry Strategy

• First educational institutions– computer education camps

• Next the home hobbyist via mail order

• Finally retail market using stores

• Expansion would include add-in boards for sound cards, modems, etc.

Market Analysis

Exhbiti A

Economics of the Business

• Kits to sell for– $699 basic kit

– $899 super kit

– $1500 deluxe kit

– Exhibit D p69 shows price sensitivity

– Exhibit C p59 shows competitor comparison

• Microsoft Corp license for MS-DOS, $32 per machine

Basic Assumptions for Cash Flow Ananlysis

Cash needed to make A/R payments and payfor startup costs, sum of 1 to 2

Startup funds in checking book

Check book balance as ending cash = carryover – cash needs

Cash flow = cumulative total

Usually the basis for royaltiesCost of Goods SoldNet sales - COGS

Fixed costs = $228,809

Earning Before Taxes @30% tax rate

PC Build Business Plan

• A good opportunity or just another crazy idea?–Should this business be started?

• 1992 versus 2009, has the environment changed?

–Would you invest in the business?–What should the founders do?