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

Are You Ready to Take the Plunge?

Tom Kalchik, Assoc. DirectorMSU 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.


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


Creating Differentiation

Physical Change

Perceptual Change

Service Change

Supply Chain Change

Quality

Functionality

Form

Place

Time

Ease of Possession

MeansSource


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?


Cus

tom

er S

cope Broad

Target

NarrowTarget

Production Strategy

Lower Cost Differentiation

CostLeadership

Differentiation

CostFocus

DifferentiationFocus

Source: Michael Porter, “Competitive Advantage”


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


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!


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


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)?


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


Mission, History and Objectives General description of the business Mission and vision History Keys to success Goals and objectives


Organization/Operations

Business structure Location Plans for production/operations Critical resource needs


Marketing Plan

Market research Environment and industry analysis Target markets Competition Marketing Mix

– Product, Place, Promotion, Price


Management/Human Resources Organizational chart with planned

positions and numbers Critical job descriptions Resumes of principals


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


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.


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


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


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.


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!


Resources MSU Product Center:

– www.aec.msu.edu/product– www.aec.msu.edu/product/

counselor_alpha.htm NxLeveL:

– www.nxlevel.org MI SBTDC:

– www.misbtdc.org/ Purdue AICC for on-line business plan:

– www.agecon.purdue.edu/planner/

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

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