University of Dayton Business Plan Competition Showing Growth with your idea www. UDBPC. com

Why Judges like growth Growth by itself is not a good (just ask any cancer cell) But a good business idea can be shared with others, creating even more wealth for founders and investors Sometimes it is like a gold rush—you prove out a concept, and that causes all sorts of people to prospect in your space. Staking out a larger area may be the smartest tactic for Survival

Four Growth Models Replication Model Scaling Model Roll-up Model Roll-Out Model

1. Replicability Means the idea can be copied over and over without much problem Doesn’t require great specialized knowledge on the part of local managers Tends towards uniformity. Replicability is inherent to franchising. – Document, document, document! College based businesses are naturals for replication (4,000+ locations)

Making replication work Remove yourself as the source of value-added— delegate to others Identify aspects of plan that are unique, and protect them Decide if uniformity or localization matter most (McDonalds vs. Old Spaghetti Factory) Hire professionals who can train and equip the clones

Making Replication work McDonalds has “Hamburger U”, where owners go to learn the McDonalds process. McDonalds spends heavily on training to ensure consistent expectations from each store. Managing cash flow is crucial—easy to grow into bankruptcy if not careful

2. Scalability Similar to replicability, but it means that adding new sales is actually cheaper. High fixed costs, low variable costs. E-Commerce is really a scaling business model: just add blades to the server farm. If a unit requires your personal sales ability, its scalability is very limited Automation often means a business can triple in sales without needing to add employees.

Dangers of a scalability growth model Leads to tremendous price pressure when competition enters a market Fiber optics lost $100 billion based on price war over a highly scalable product. Barriers to entry are fewer, and resource endowed competitors can invade your market.

Scalings “Element of surprise” Scalability is often a model which works best when “get big fast” is not a requirement If in proving out the concept you invite in competition, success can be very limited because competitors enter the market

3. Roll-up (Probably the weakest one for the UDBPC) An acquisition model, where you buy local “Mom and Pop” outlets, and convert them into a chain. Primarily retail or service. – Two styles: uniform and localized It isn’t you are buying growth, you are buying quick market entry. Funeral homes, florists, etc. make good roll-ups. – (so does Frisch’s Big Boy).

Challenges to making Roll-Ups work Capital intensive—major start-up costs Need to do “due diligence”—this can go bad ugly if you buy too rapidly Culture clash—can the management accept the changes you are making Non-competes—can the owner become a competitor?

Benefits Economies of scale—buying bulk to save money Developing an advertising awareness Buying stable cash flow can lead to future expansion Good training opportunities

4. The Roll-out (Get big fast) In many ways is the opposite of a scalability model

The Roll-out Get large fast, immediate national scale businesses High risk, because the costs of going national are so high – FedEx is a successful example of this – Webvan is a failed example of this

Roll-Outs require seasoned management There really isn’t time for a “dress rehearsal”; you have to get the concept right the first time Technology often falls into this category– can you just sell an iPod to a part of the market? High up-front costs often create valuable barriers to entry.