Building a Business Case International Association of Congress Centres Liverpool July 6th, 2010

What is a Business Case? States a problem Describes a solution Estimates the cost to implement the solution States the ROI that could be realized if the solution is implemented

Business Case Process Develop Assumptions 2 Scope of Info Predict Simplify Clarify Calculate Financial Impact 1 5 8 IRR ROI Determine Non-Financial Impacts Determine Benefits Desired Outcomes Needs 3 Summarize Results 7 Define the Problem/Solution Decision Matrix Qualitative factors Revenue Cost savings from economies of scale Sensitivity / Risk Analysis 6 Assumptions? Structure? Determine Costs 4 Operating Capital

Underlying Realities Convention centres don’t generate a direct ROI Focus is on economic impact The beneficiary often isn’t the funding source Long-term (capital) $ vs. short-term (optg.) $ No time value of money Your problem may not be “their” problem Or as big a problem as their other problems Or as pressing as their other problems

The Vancouver Timeline VCEC Process Competitive Process B of T Task Force PPP Process Customer Focus Groups Broader Business Community Engaged Economic Impact #1 Economic Impact #2 Economic Impact #3 Business Case #1 Business Case #2 Business Case #3 Business Case #4 Business Case #5 Business Case #6 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Expansion Approved Games Bid Vancouver gets Games

What do we Know Picture of VCC There you have the new building, with old building in background Opened two years ago Business cases are table stakes Necessary to support but are not the trigger. A number of things that really influence and dictate what you can do LET ME TAKE THE REST OF MY TIME AND FOCUS ON HALF A DOZEN KEY PROCESS ITEMS

You Don’t Need Perfect Info You do need: Better information than anyone else Basic event performance data: Historical event performance Turnaways (unavailability of size and dates) Prospect/target list (not the telephone book!) Basic financial performance data Where are the opportunities: revenue and cost Sometimes….the answer is NO!

Know Your Audience The Bureaucracy The Politicians The Community at large The Naysayers

Build Support Problem Solution Immediate Other areas Industry The “Idea” Immediate Other areas Bureaucracy Industry Business Community Key Supporters In Power Opposition All levels Politicians Influencers Community at Large

What’s the ROI from a Library? Not all public spending needs to generate ROI Convention Centres need to demonstrate: Catalytic impact (hotels, retail, support) Networking and industry/academic exchange Leading by example Civic pride “Cities were invented to facilitate the exchange of ideas, friendships, material goods and skills. How good a city is at facilitating exchange determines its health – economic, social, cultural and environmental. Public space forms a vital conduit…by providing platforms for everyday interaction and information flows – the basis and content for the life of cities.”

Timing is Everything Opportunities: Barriers A competitor city is expanding A land parcel is available (time limiting) A grant program A community leader ready to get involved An election Barriers A competing “project” Budget challenges

Public-Private Partnerships A PPP can: Raise limited capital (trade off revenue stream) Encourage creativity (can also stifle) Force trade offs (e.g., revenue, management) Limit construction risk Facilitate wider project support A PPP cannot: Easily adapt to revenue volatility Make borrowing cheaper by the private sector Make the project profitable Make the project less complex (just the opposite)

A Picture’s Worth….

The Naysayers "A Lot of Hooey“ “Field of Schemes” “Most of the feasibility studies are based on unrealistic assumptions and generate forecast numbers that are not likely to be realized.” Dr. Heywood Sanders

Conclusions Core market and financial analysis is “table stakes” Perfect information isn’t necessary Know your audience Build support gradually Don’t forget the social/community benefits PPPs can be useful in right circumstances Timing is everything Criticism is inevitable…stay focused on the solution

Q & A