The Nuts and Bolts of Business Plans
Business Models
Richard P Kivel
CEO
MolecularWare, Inc.
January 22nd 2004
6:00pm MIT
Background
Career:
2001- Present - CEO, MolecularWare, Inc (company acquired in June 2003)
98-01- Director of Sales Interliant / NDA (company acquired Feb 1999)
96-98 - EVP, RentGrow Software, Inc.
91-96 - President, Advanced Security Technology ( company acquired Dec 1995)
Education:
American International College – BA
Boston College – MS
UPenn -- Advanced program in Genomics, Drug Discovery, Therapeutics
Other:
MIT 50K Entrepreneurship Competition, Mentor 96-98, Judge 1998- Present
Young Entrepreneurs Organization (YEO) Member 1994-Present
MIT Deshpande Center - Catalyst Program Executive
Richard Kivel - MIT/ IAP 2004
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What is a Business Model
This is the method by which a firm uses its
resources to offer its customers better value
than its competitors and make money doing
so.
It tells who pays, how much and how often.
def:
Reality Check
28+ Million Firms in the U.S.
* 96%
* 3.6%
* 0.4%
under $1 million in gross sales
$1-3 million in gross sales
$8-12 million in gross sales
-Most employ less than 50 employees.
* 17,000 $40-75 million in gross sales
* Only 2,500 companies do more than $500 million.
* 500 +- companies in the world do over $11 billion
*Bottom Line Consultants, Richmond VA
Richard Kivel - MIT/ IAP 2004
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The Right Ingredients
A Team with Relevant Experience
Market Size
Technology
Reasonable Projections
Competitive Advantage
Exit Strategy
Richard Kivel - MIT/ IAP 2004
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Business Models need to measure:
Revenues
Cost
Profit
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Which model do you choose...
Models depend many things including:
Stage of development of your business
Your Value Proposition.
3 Stages of Growth
Stage 1: Early Growth
Sales Driven
Flexible/Agile/Creative
Loose controls and procedures
Stage 2: Rapid Growth
Delegation
Operations Driven
Focus is internal
Stage 3: Late Growth
What used to work no longer does.
System become obsolete.
Lose touch with customers
Richard Kivel - MIT/ IAP 2004
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Five Critical Growth Drivers:
1- Market Intelligence
2- Strategic Leadership
3- Clarity of Purpose & Direction
4- Strategic Planning
5- Infrastructure
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Corporate Values and Business Models
Southwest -vs- Virgin Air
Wal-Mart -vs- Nordstrom's
Dell -vs- e-Machines
Piaget -vs- Swatch
Amazon.com -vs- The Mall
MobileStar -vs- RoomLinX
VirtualInk –vs- Smart Technologies
Richard Kivel - MIT/ IAP 2004
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Different Models to Evaluate
Direct
Mass Media
Retail
Telemarketing/ Phone
Sales
Channels, Distributors Trade Shows and
and Partners
Conferences
OEM Channels
Internet - Web
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Three Examples of…
Direct
Distributors, Channels & Partners
Original Equipment Manufacturer (OEM)
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Direct Sales
Positives:
High Contact
Customer relations
More Control
Multi Purpose
Experts in the field
Negatives:
Free Consulting
May not like rep or rep
leaves
High Cost
Gains lots of company
knowledge
Retention
Richard Kivel - MIT/ IAP 2004
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Distributors. Channel, Partner Sales
Positives:
Cost of Sale is Low
Hands-off Sales
Exposure in new
markets
Credibility
Competitive Edge
Negatives:
Up-front fees
No control
Distant clients
Performance
Technical Pressure
Require lots of attention
and training
Richard Kivel - MIT/ IAP 2004
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OEM Channels
Positives:
Prestige and Publicity
List Sharing
Royalties / steady
revenue stream
Increase Market
Presence
Technical Control
Negatives
Competitor envy
Two way street
Or not
Technical pressure
Channel Conflict
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Others:
Telemarketing/ Phone Sales
Trade Shows, Conferences
Internet- Web
Retail
Mass Media
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How do you know your
succeeding?
What do you measure?
Fort
Fort 500
500 $289k
$289k avg
avg rev
rev p/e
p/e
Small
Small Biz
Biz $100k
$100k avg
avg rev
rev p/e
p/e
Microsoft
Microsoft $250k
$250k avg
avg PROFIT!
PROFIT!
What are the Value Drivers you need to measure?
Sales/
Revenue
Profits, Gross
or Net?
Rev per
employee
** (see above)
Rev per SQ
foot
Billable Hours
Utilization Rate
Closing Rate
Sales Cycle
Average Sale
Market Share
Number of
clients
Share Price
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Re-Cap #1
Do you have the right TEAM?
What STAGE is your Company?
What MODEL is most common in your
industry?
What does your customer VALUE?
What do you MEASURE?
Prepare for CHANGE!
Richard Kivel - MIT/ IAP 2004
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Business Strategy
needs to
address more then…
A Business Strategy
Revenues
Cost
Profit
Richard Kivel - MIT/ IAP 2004
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Five Critical Growth Drivers:
1- Market Intelligence
2- Strategic Leadership
3- Clarity of Purpose & Direction
4- Strategic Planning
5- Infrastructure
Richard Kivel - MIT/ IAP 2004
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Successful Companies have a Leverage
Point that allows them to leap past their
competitors!
Scalability
High Switching Cost
Speed
Pricing
Service
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The Leverage Point Matters!
Amazon
RoomLinx
Boston Chicken
Jamba Juice
Match.com
AOL
Virtual Ink
Partnership w/ Distributors
Proprietary Technology
Speed via Franchise Model
Speed or lack of..
Network Effect
High switching Cost
Price Performance
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Closing thoughts
The Right Team
Mentors
Advisors
Networking
MIT, MIT , MIT
No fear
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Thank you!
Richard P Kivel
CEO
MolecularWare, Inc.