Are You Ready to Take the Plunge? Tom Kalchik, Assoc. Director MSU Product Center

MSU Product Center for Agriculture and Natural Resources The “Plunge?” Creating CUSTOMER VALUE –All products/service must create this! –It is the key to uniqueness, marketability, and profit! Through DIFFERENTIATION –Being different to the point of unique. –Differentiation: leads to the uniqueness that creates customer value.

MSU Product Center for Agriculture and Natural Resources Differentiated Products: The Means to Value-added Creating customer value and competing against others based on increasing the bundle of benefits rather than decreasing the price. Alternative Names for Value-added –PRODUCT AGRICULTURE –CONSUMER-RESPONSIVE AGRICULTURE

MSU Product Center for Agriculture and Natural Resources Creating Differentiation Physical Change Perceptual Change Service Change Supply Chain Change Quality Functionality Form Place Time Ease of Possession Means Source

MSU Product Center for Agriculture and Natural Resources How does this apply to niche markets? Can’t be all things to all people Need to focus Need to know your customer –Direct? –Channel? –Ultimate?

MSU Product Center for Agriculture and Natural Resources Customer Scope Broad Target Narrow Target Production Strategy Lower Cost Differentiation Cost Leadership Differentiation Cost Focus Differentiation Focus Source: Michael Porter, “Competitive Advantage”

MSU Product Center for Agriculture and Natural Resources But will you be able to swim? Time Money: Financial Capital Technology –Property, Plant, & Equipment –Intellectual Property –For production, marketing, & distribution People: Employees and Advisors

MSU Product Center for Agriculture and Natural Resources Why a Business Plan? You cannot supply all the resources yourself! You need others! –Others must thus be convinced that your innovative idea is unique, marketable, and profitable. –A plan is your sales brochure for them. The plan is essential to your knowing what you need and when!

MSU Product Center for Agriculture and Natural Resources The Challenge You Face To systematically turn a business or product idea into a real start-up or launch. Desire often overwhelms reason. –The glory of the idea “Build it and they will come.” “Everyone will want it.” “It’s the greatest thing since sliced bread.” –Missing the logical flow of development Operational detail before concept/strategy development Production before marketing No consideration of the real return potential

MSU Product Center for Agriculture and Natural Resources The Intuition about Process First, can you tell a plausible “fairy tale” about the idea of the venture? –Market/customer driven –Internally consistent and appealing Then, can you reasonably make a profit from the venture if everything goes well? Finally, can you “prove” to yourself and to others the venture’s potential to work (feasibility)?

MSU Product Center for Agriculture and Natural Resources So What’s in a Business Plan? Executive Summary Mission Statement, History, & Objectives Business Organization/Operations Marketing Plan Management/Human Resources Financial Plan Supporting Documents

MSU Product Center for Agriculture and Natural Resources Mission, History and Objectives General description of the business Mission and vision History Keys to success Goals and objectives

MSU Product Center for Agriculture and Natural Resources Organization/Operations Business structure Location Plans for production/operations Critical resource needs

MSU Product Center for Agriculture and Natural Resources Marketing Plan Market research Environment and industry analysis Target markets Competition Marketing Mix –Product, Place, Promotion, Price

MSU Product Center for Agriculture and Natural Resources Management/Human Resources Organizational chart with planned positions and numbers Critical job descriptions Resumes of principals

MSU Product Center for Agriculture and Natural Resources Financial Plan Personal financial statements & needs Costs of start-up, production, marketing, distribution, etc. Sources and uses of proceeds Pro forma profit/loss, balance sheet, & cash flow Breakeven and related financial analyses

MSU Product Center for Agriculture and Natural Resources Supporting Documents Appendices detailing assumptions and supporting analyses Letters of intent from suppliers, customers, and other critical partners Legal documents Anything else that might increase the chances of making the venture successful.

MSU Product Center for Agriculture and Natural Resources Is All This Really Necessary? The process can be made simpler or more complex depending on: –How big the venture needs to be Out of your garage vs. millions of $ in assets –Whether you’re building a new business or expanding an existing one –The ability to experiment as you plan –How risky the venture really is

MSU Product Center for Agriculture and Natural Resources Conclusions Customer value is created through differentiation There are means to create differentiation and sources for the bundle of benefits Niche markets require focus on either cost or differentiation There are degrees of niche markets

MSU Product Center for Agriculture and Natural Resources Conclusions New venture ideas can be worked through a reasoned process: –Concept Definition –Initial Business Plan –Detailed Business Plan The goal is to analyze, develop and empower within a process that matches level of investment with quality of idea.

MSU Product Center for Agriculture and Natural Resources Conclusions The Business or Product Plan brings together: –The innovative idea –Documentation of the entrepreneurial drive –The detailed analysis of and need for resources Without a plan the venture won’t go. With a plan, the venture is still not a sure thing!

MSU Product Center for Agriculture and Natural Resources Resources MSU Product Center: – – NxLeveL: – MI SBTDC: – Purdue AICC for on-line business plan: –