by Professor Ron Fournier Business Plans by Professor Ron Fournier

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 and you can use this as a guide 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

Sales Units Purchases AR collections AR payable

Cash needed to make A/R payments and pay for startup costs, sum of 1 to 2 (AR collections + rest are expenses so -) Startup funds in checking book Check book balance as ending cash = carryover – cash needs Cash flow = cumulative total of cash needs

Usually the basis for royalties Cost of Goods Sold Net 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?