Course Outline for
BUS 592 — Entrepreneurship/New Venture Creation
Sonoma State University
Tuesday: 7:00 – 9:40 p.m.
February 2 – May 18, 2010
Sonoma Mountain Business Cluster, Conference Room “A”
1300 Valley Horse Drive, Rohnert Park
Dr. Armand Gilinsky
Professor of Business
Stevenson 2026F: 707.664.2709 (TTh 3-4 pm & by appointment)
Sonoma State University
Rohnert Park, CA 94928 USA
armand.gilinsky@sonoma.edu
BUS 592 — Spring 2010
Dr. Gilinsky/page 2
Required Texts
Burlingham, B. (2005). Small Giants. New York: Penguin Books [Burl]
Timmons, J. A. & Spinelli, S. (2009) New Venture Creation, 8/E, NY: McGraw-Hill-Irwin.
[T&S]
Kawasaki, G. (2004). The Art of the Start. New York: Portfolio Penguin Books.
Instructor’s website:
Username:
Password:
www.sonoma.edu/users/g/gilinsky/
gilinsky
tba
Required Readings (purchase, or on reserve in the Schulz Information Center, or download)
Arkebauer, J. B. (1995) The McGraw-Hill Guide to Writing a High-Impact Business Plan, New
York: McGraw-Hill. [Due 2/28/2009]
Gilinsky, A. (1999). “Mendocino Brewing Co.,” (Download from instructor’s website) [Due 3/9]
Gilinsky, A. (2005). “The Happy Holidays Memo,” (Download) [Due 3/16]
Gilinsky, A. et al. (2005). “High Tech Burrito,” (Download) [Due 4/20]
Levinson, J. C. (1998). Guerrilla Marketing. New York: Houghton Mifflin. [Due 3/30]
Porter, M. E. (2008). “The Five Competitive Forces That Shape Strategy,” Harvard Business Review,
86:1, January. (Download from Business Source Premier or on reserve at Schulz) [Due 3/9]
Recommended Readings and Websites
For journalism-level information read Entrepreneurship or Inc. The new enterprise/small
business management sections of The New York Times, Business Week, and The Economist
are also highly recommended and are available at Schulz. Visit http://www.spartina.com/,
which provides on-line resources for entrepreneurs, and www.DealBase.com, which is an
excellent case study about starting a web-based business (its founder is coming to class on
February 24th). Consider joining LinkedIn (http://www.linkedin.com) and forming a group,
or creating a Web 2.0 network to discuss your class project using ning at www.ning.com.
Interested in seeing entrepreneurs give elevator pitches? See: http://pitches.techcrunch.com/.
Course Prerequisites
You need to have successfully completed BUS 540, 560, and 570 and at least half of the
required and elective MBA courses and turn in to the MBA Coordinator a completed GS01
“Advancement to Candidacy” form in order to take this course. You will also need to
complete and have both the Instructor and MBA Coordinator sign a GS02 form upon
completion of your culminating project (see below) at the end of the semester.
Course Objectives and MBA Culminating Project
The objective of this course is to teach you to apply the skills you have learned in the MBA
core courses toward the goal of starting a business, i.e., becoming an entrepreneur. Working
in teams, you will learn to identify, conceptualize, plan, finance, launch, manage and harvest
new ventures. Your project is to develop a business plan and investor prospectus for a new
venture of your own choosing or in consultation with an established organization. Class
discussion, readings, cases, guest speakers, the venture plan, “elevator pitches,” and external
judges’ feedback and evaluations are the learning tools. Your project is developed throughout
this course and involves the comprehensive evaluation and presentation of an opportunity
selected by your venture team. See Course Calendar, pp. 4 & 5 of this syllabus. Your venture
can be: 1) a startup based upon your own idea; 2) a corporate “new venture” project or
BUS 592 — Spring 2010
Dr. Gilinsky/page 3
product within an existing corporation; 3) a buy-out of an existing business; 4) a spin-off
from an existing corporation; 5) a business plan for a non-profit organization or public
services agency; or 6) a strategic plan for an existing corporation or a family business you
plan to enter. Your course project may be self-initiated or chosen from a list of possible
ventures provided by the instructor or by guest speakers. As entrepreneurship is a dynamic
field, you can expect that your project idea will evolve during (and most likely after) the
semester.
This should be a practical experience for you. Whenever possible, contact individuals with
the proper expertise, e.g., to determine the cost of capital and collateral requirements for a
loan, speak to a venture capital firm or a bank; to determine the cost of a specific piece of
equipment, speak to an equipment supplier; to determine the feasibility of market entry, visit
competing businesses, etc. Seek out both primary and secondary sources of data, particularly
for the industry and competition and marketing sections of your business plan. Create a
working prototype of your product or service, do a market test, and conduct a survey or a
focus group to gain necessary consumer information. You must quantify the size of your
total market and target market subsets as well as your venture’s projected share. For
secondary data, consult the hard copy reference books and the electronic databases (e.g.,
ABI/Inform, Business Source Premier, Lexis/Nexis, and Factiva) available in the Schulz Info
Center, or contact our business librarian, Rick Robison, (robisonr@sonoma.edu) for further
information. Keep track of primary and secondary sources consulted to develop a
Bibliography for your interim project deliverables (drafts) and final report.
Course Requirements & Grading
Attendance will be taken. Each student is permitted one (1) unexcused absence.
Class Attendance & Contribution (see p. 9) ...................................................... 20%
Interim deliverables (see pp. 6-8 for individual assignments and weights) ...... 40%
Final report (see p. 8) ......................................................................................... 40%
Total ....................... 100%
BUS 592 — Spring 2010
Dr. Gilinsky/page 4
Course Calendar
Week Date
Topic(s)
Reading/Assignment
1
2/2
Entrepreneurship as a Career
The Plan and the Pitch
Why Vision & Values Precede Strategy
Preview Assn #2
Syllabus + T & S: Ch. 1
Prepare: “Sonoma Crest
Winery” (pp. 11–13, Syllabus)
Dead Poets’ Society (in class)
2
2/9
The Entrepreneurial Process
Timmons’ Model/Leading Practices
T & S: Chs. 2 & 10
“Small Wins Exercise” (p. 10,
Syllabus; do in class)
ASSN. #1: Résumé & Career
Goals + Class Cards w/head
shot photo
3
2/16
How I Built My Venture
Generating Winning Ideas
Preview Assn #3
Guest: Erin Colbert, HubSpot.com
T & S: Chs. 3 & 5
Prepare: Idea Generation
Exercise (T & S pp. 184-186:
we will go over in class)
ASSN #2: Interviews with
entrepreneurs
4
2/23
Screening Venture Opportunities
Return Assns. #1& #2; Preview Assn #5
Guests: Evan Reece & Ron Schneidermann, Liftopia
Burl: All
T & S: Ch. 6
5
3/2
The Venture Plan
Building Creativity in Teams
Creating the Venture Team
From Bootstrap to Scale
Teams Present Project Proposals
Guest: Thibaut Scholasch, Fruition Sciences
T & S: Ch. 8
Arkebauer, The Business Plan
(On reserve @ Shultz)
“Ideal Venture Plans” (pp. 1416 of Syllabus)
Sample business plan (handout)
ASSN. #3: Venture Screen
ASSN. #4, Creating the
Venture Team (in class)
6
3/9
Entry Wedges
Situation Analysis
Industry Attractiveness & Industry Forces
Resources & Capabilities Quiz on MBC case!
Return Assn. #3; Preview Assn. #6
Porter, “The Five Industry
Forces That Shape Competitive
Strategy” (On reserve @
Schulz)
Case: “Mendocino Brewing
Company” (Download)
ASSN. #5, Culminating
Project Proposal + GS01 due
7
3/16
Entrepreneurial Leadership, Culture & HR Issues
Technology Strategy
Crisis Management
Return Assn #5
Guest: John McHugh, Winningworkforce.net
T&S: Ch. 9
Burl: Chs. 3 & 4
Case: “The Happy Holidays
Memo” (Download)
BUS 592 — Spring 2010
Week Date
Dr. Gilinsky/page 5
Topic(s)
Reading/Assignment
8
3/23
The Marketing Plan
Guest: Melissa Jones, EverFile Systems
Teams Present Industry Analyses
Preview Assn #7
ASSN. #6, Industry Analysis
9
3/30
&
4/6
No class—Teams Work on Projects
Levinson, Guerrilla Marketing
(On reserve @ Schulz)
10
4/13
No class—Furlough Day
11
4/20
Financial Analysis for New Ventures
Legal and Regulatory Issues
Navigating the Speed Bumps to Rapid Growth
Franchising Strategies
Return Assn. #6; Preview #8
Teams Present Marketing Plans
Guest: Greg Maples, High Tech Burrito
T & S Chs. 11, 12, 13 &17
Case: “High Tech Burrito”
(Download)
ASSN. #7, Marketing Plan
12
4/27
No class—Teams Work on Projects
T & S: Chs. 14, 15, 16 & 19
Kawasaki, The Art of the Start
(all)
13
5/4
What Lenders/Investors Want
Negotiating the Deal
Creating Executive Summaries
Harvesting Your Venture
Practicing & Perfecting Your “Elevator Pitch”
Return Assn. #7
Team “dress rehearsal” + conferences
Guest: David Hehman, North Bay Angels/Spartina
Handout: sample Executive
Summaries
Review Syllabus pp. 13–15
Assn. #8, Pro forma financials
and assumptions
14
5/11
Return Assn. #8
Present Final Projects + One-page Executive
Summary
Guest judges: tba
ASSN #9: Present Final
Projects @ Sonoma Mountain
Business Cluster
15
5/18
Final Project Write-Ups due
Feedback from Presentations on 5/11
Turn in GS02 form tonight!
ASSN #10: Compilations +
GS02 forms due for signature
Student evaluations
No class—Spring Break
BUS 592 — Spring 2010
Dr. Gilinsky/page 6
ASSIGNMENT DESCRIPTIONS, DUE DATES, AND WEIGHTS
Please type and double-space all assignments. Submit in class in hard copy (printed) form upon
arrival in class at 7:00 pm on dates due. Be sure that your name is on every page of the
document, preferably in the upper right-hand corner. Use 12 pt. (or larger) Times New Roman
font for text and 12 pt. or larger (preferably) and Arial font for tables and graphs. Make enough
extra copies of each assignment for your records and for your team members. Late assignments
received after 9:40 p.m. on dates due will be penalized one full grade level per day (for example,
an “A” would be lowered to a “B,” and so on). Grading weights are indicated.
1.
Feb 9 — Résumé and Career Goals (Grade weight = acceptable or do over)
Your résumé and career goals for the next three years and ten years are due. Also name at
least two career/life role models and explain why you desire to emulate them. List your
favorite book, movie, and television show. Describe a personal accomplishment of which
you are most proud. What industry would you like to work in and/or start your own
business? Is there a particular business for which you would like to work?
2.
Feb 16 — Interviews with Entrepreneurs (Grade weight = 5%)
Each individual student must interview three (3) small business owners or entrepreneurs
who were founders of three separate organizations. Use the readings in Burlingham’s
Small Giants book to inspire your efforts. Your interviews should cover the following
questions: 1) How did you come to perceive your personal opportunity and to act on it
(and what encouraged or deterred this)? 2) What do you consider to have been the critical
success (and critical *failure*) factors for your venture opportunity? For example, how
important are customer relationships, social networks, access to suppliers, access to
capital, competitors, human resource practices, government regulations, economic
factors, etc.? 3) Do you have a business plan and if so, how often is this updated? If you
do not have a business plan, why not/or for what reason(s)? Do you need a business
plan? If so, is there potential for a semester-long student project and would you be willing
to participate this semester? Your write-up of each interview should be no more than one
(1) double-spaced and typed page, should include contact information for each
interviewee (e-mail and phone number), and be submitted via e-mail. Please use separate
pages for each interviewee’s responses!
3.
4.
Mar 2 — Venture Opportunity Screen (Grade weight = 5%)
Mar 2 —Creating the Venture Team (Grade weight = acceptable or do over)
Each student must do a Venture Opportunity Screen of her/his best idea. Use the idea
generation exercise in Timmons & Spinelli’s New Venture Creation (pp. 184-185) to help
get you started. Ideas are not limited to new startups, but can include any of the venture
options mentioned earlier. Individuals will be picked at random to present their ideas. Use
the Venture Opportunity Screening Exercises in T & S Chapter 6 to assist you with this
assignment. These guides will help you ask the right questions. Your Venture
Opportunity Screen should be 4 to 5 double-spaced and typed pages and written in the
form of a prose evaluation. Do not merely copy and fill-in-the-blanks of Timmons’
Screening Guide. This is not acceptable. The Screen for your opportunity should contain
a section that outlines your planned Scope of Work, what key questions you believe have
to be answered, and how you will go about answering them. Essentially, a Venture
BUS 592 — Spring 2010
Dr. Gilinsky/page 7
Opportunity Screen is a quick evaluation of an idea to determine if it represents an
opportunity worth pursuing. A Screen indicating your opportunity is not worthy of further
pursuit is an acceptable outcome. Begin by writing down the pros and cons of everything
you know about your idea without doing any in-depth research. Try to address major “yes
or no” questions that will help you determine if this is the right opportunity for you. For
example: do I have or can I acquire the necessary expertise? Is this a lifestyle or rapid
growth venture? Will this business allow me to keep my travel to a minimum, to live
where I want to live, to come into contact with people I respect? Each student must join a
team composed of 2-4 students. These teams must meet and select, from the Venture
Screens prepared by each student, which one opportunity the team will further develop
for the rest of this course. This should be a lively session, with each group member
campaigning for the selection of his/her opportunity. At some point every entrepreneur
must attract other key players to their team. The ability to inspire someone to see your
vision and dream your dream is a vital skill. You now need to create a venture name and a
logo for your venture; these will be due next week as part of your culminating project
proposal. Teams cannot be fewer than two or exceed four students without my
permission.
5.
Mar 9 — Culminating Project Proposals (Grade weight = 5%)
Each team must submit a printed roster of its members’ names and a planned Scope of
Work for developing the opportunity. This Scope of Work must be detailed and
expanded from what was submitted in the original Screen and must include the primary
responsibilities of each team member. For the Scope of Work document, use the one-page
Executive Summary format on p. 14 of this Syllabus as a guide. Include your team name
and logo, your vision statement, your mission statement, and a preliminary situation
(SWOT) analysis. Be prepared to revise those as your project evolves! Groups will be
picked at random for brief oral presentations of this and later assignments.
6.
Mar 23 — Industry Analysis (Grade weight = 10%)
Industry analysis on your venture opportunity is due tonight. Your drafts should indicate
where you have made progress and where there are still gaps, how these will be
completed, by whom and by what date. Use the reading on “The Five Competitive Forces
That Shape Strategy” by Michael Porter (2008) and James Arkebauer’s business plan
book to guide your efforts. Your team’s industry analysis should be 3-5 pages,
summarizing the key findings. Bullet points, headings, tables, graphics, etc. are better
than long blocks of text. Cite all sources of data! Be sure to include sufficient detail about
the strengths and weaknesses of your competitors and how your venture will overcome
rivals’ strengths or exploit rivals’ weaknesses. Provide a comprehensive Bibliography of
sources and people consulted. One submission per team, please. Note: If you disagree
with your team’s assessment, you may submit a “minority report” under separate cover.
7.
Apr 20 — Marketing Plan (Grade weight = 10%)
Marketing plan for your venture is due tonight, including a description of niche and
targeted segments, size of each segment, description of unique product or service
advantages, pricing comparisons, and a top line forecast by units and dollars. Your drafts
should indicate where you have made progress and where there are still gaps, how these
will be completed, by whom and by what date. Revenue forecast should be by quarters
BUS 592 — Spring 2010
Dr. Gilinsky/page 8
for three years with end-of-year totals shown. Charts and graphs are often useful means
of summarizing data for this report. A convincing top-line forecast is the most important
component of most business plans. The top line is made believable by a solid industry
analysis and a comprehensive market analysis. Be sure to include in your top line
justification substantive proof that there is a market niche for your product or service and
that you will better serve its needs. Review Burlingham’s Small Giants book for guidance
on how to avoid common pitfalls in marketing planning. Consult Jay Levinson’s
Guerrilla Marketing book (on reserve) for low-cost ideas. Justify your projected market
share. Describe the demographics of your targeted market segments. Is your market
growing, stable, or declining? What are the other significant trends in the market with
regards to economic forces, competition, government regulations, technology, etc.? What
are your proposed entry and pricing strategies? What are your sales and distribution
plans? What will be your positioning versus the competition? What barriers to entry will
you have to overcome? Erect to prevent other players from entering? What are the
milestones to be achieved by your venture and by when? Revise your Bibliography of
sources and people consulted.
8.
May 4 — Pro Forma Financials & Assumptions (Grade weight = 5%)
Pro forma financial statements are due tonight. Present your income statements, balance
sheets, and cash flow statements for three (3) years by quarters. For the income
statements, include a column at each year-end that shows totals for the year and another
column that shows each line item as a percentage of net sales for the year. Do the breakeven analysis. Perform ratio analysis for each of the three year-end periods. Include a
separate page that documents all of your assumptions. In a paragraph or two, address
whether or not you still perceive your venture to be feasible. If it is, outline possible
financing strategies. Describe what reward streams your venture can create and on what
terms you might exchange these with potential investors.
9.
May 11 —Presentation of Final Projects (Grade weight = 20%)
Review pp. 14 - 16 of this Syllabus for guidance. Each venture team will select one (1)
person to deliver a twenty (20) minute presentation on its chosen opportunity, followed
by a ten (10) minute Q&A session. However, less may be more! This session will be
judged by community entrepreneurs and financiers, and so be prepared to be punctual,
polished and professional. Prepare a one page Executive Summary of your project plan
for duplication and distribution to the audience (40 copies). Be sure to introduce your
team members and specify their roles; each team member must be present and able to
answer questions from the judges.
10.
May 18 — Compilation of Final Projects (Grade weight = 20%)
Be sure to include résumés of all team members in an Appendix to your final report, and
to turn in your GS02 forms for signature at the final session. Your final project
submission is an enhancement and compilation of all previous assignments. Your
previous assignments make up the key components of any business plan for a new
venture. None of you will have the time to do a complete business and operating plan,
which typically takes 250–500 hours for anything larger than a lifestyle venture. What
additional sections you choose to add and/or emphasize is up to your discretion, since the
correct choice will depend upon the nature of your venture. Each team must include a
BUS 592 — Spring 2010
Dr. Gilinsky/page 9
section that briefly describes what additional information would have been included
had there been sufficient time to complete their business plan.
Class contribution (Grade weight = 20%)
Class contribution will count for 20% of your grade (see below for guidelines). As Woody
Allen once quipped, “80% of life is just showing up!” Venture teams will be selected at
random throughout the semester to make a 7–10 minute presentation on their findings for
each interim assignment. We will not have time for every team to make a presentation on
each assignment. An entrepreneur must always be prepared to discuss the latest evolution of
her/his venture with a potential ally, team member, or source of financing.
Contributions are evaluated on the basis of the following:
1. Understanding of the selected readings, guest presentations, and case studies,
2. Asking good questions that help move discussions of readings and lectures along, and
3. Actively and positively making a difference to your venture team in the planning and
execution of your venture projects.
BUS 592 — Spring 2010
Dr. Gilinsky/page 10
“SMALL WINS” EXERCISE
A small win is a concrete, complete, implemented outcome of moderate importance. By
itself, one small win may seem unimportant. A series of wins at small but significant
tasks, however, reveals a pattern that may attract allies, deter opponents, and lower
resistance to subsequent proposals. Small wins are controllable opportunities that produce
results. —Weick, K.E. (1984). Small wins: redefining the scale of social problems.
American Psychologist, 39(1): 40-49.
Entrepreneurial Survey
1.
How would you like to spend an ideal day? week? month? What attracts you to/repels you from
this ideal existence?
2.
I would/would not like to start/acquire my own business someday because______.
3.
Imagine you had $100,000 to buy the following items. What percentage of this amount would
you allocate to these? Then, rank the top three in order of importance, 1–2–3.
A.
B.
C.
D.
E.
F.
G.
H.
Location
Lifestyle & work style
Standard of living
Personal development
Status & prestige
Ecology & environment
Capital required
Other considerations (please state) _____
4.
How would you characterize your own entrepreneurial strengths and weaknesses? (List.)
5.
List, in 3 minutes, the goals you would like to accomplish if you have exactly one (1) year from
today to live. (Assume good health in the interim, no additional insurance or borrowings, and
that you can do whatever you want to do).
BUS 592 — Spring 2010
Dr. Gilinsky/page 11
BUS 592 — Spring 2010
Dr. Gilinsky/page 12
Sonoma Crest Winery — 2009
Two brothers founded Sonoma Crest Winery in 1995. The brothers owned a small vineyard east of Santa
Rosa with a winery capable of producing 60,000 cases. They had been moderately profitable for the past
five years. To finance operations, they borrowed from a local bank, with a mortgage on the vineyard and
a working capital line of credit secured by inventory.
The older brother concentrated on winemaking and vineyard operations, while the younger brother
handled the business aspects of the company. The two were not only brothers, but also close friends.
They were dedicated to the success of the winery and hoped to pass the winery and vineyard on to their
young children.
In face of declining sales and increased sources of supply, the brothers realized that they needed a more
formal plan for the future. At a January 2009 meeting with their banker, Nancy Columbo, they were
peppered with questions for which they weren’t adequately prepared. In light of Palumbo’s questions,
they promised to provide her with a more detailed review of their operations and strategic plan within a
month.
Company overview
Sonoma Crest Winery grew from 25,000 cases to 40,000 cases in annual sales from 1995 to 2006. It
ended 2007 and 2008 with 10% declines in case sales, respectively. Sonoma Crest’s wines received
consistently good ratings and favorable reviews in the wine trade press, although many consumers had a
hard time finding its wines in stores or restaurants.
In 2004, the brothers entered into a pre-planting contract to purchase Chardonnay and Merlot grapes from
a grower in the Carneros District. The new supply of grapes was scheduled to begin with the 2008
vintage, and by 2009 was expected to supply sufficient grapes to produce 10,000 additional cases of both
Merlot and Chardonnay.
Sonoma Crest’s marketing and sales data:
 30% and 70% of sales were from Merlot and Chardonnay, respectively
 Both varietals were priced at $20 per bottle in California and about $25 per bottle in out-of-state
markets
 Wines were sold through distributors in all the major markets in California and in most states
 Approximately 50% of sales were through on-premise accounts (restaurants)
BUS 592 — Spring 2010
Dr. Gilinsky/page 13
 30% of sales were in California
 The brothers were responsible for all sales activities and spent approximately 25% of their time
traveling, concentrating on the major, out-of-state markets
 Approximately 5% of sales were purchases by visitors to the winery’s tasting room
Wine industry overview — 2008
In part due to an uncertain economy, many vineyards in Napa/Sonoma lost some value over 2007 at
market prices and in terms of their appraised values. Valuations were only flat to slightly decreasing in
Napa, and slightly decreasing in Sonoma. However, there were still lots of interested parties looking to
get into the wine business from the outside and who had money to burn.
The industry had previously forecasted about a 10% overall growth in premium wine sales for the year
but had to live with a 5% actual growth. Growth was generally due to higher volume but at moderate
prices. Profitability at the winery level in 2008 was negatively impacted by the general economic
slowdown, rising energy costs, increasing competition from imported wines, higher promotional
allowances (particularly in Q4), and higher selling expenses.
From 2007 to 2008, growth rates dropped considerably in nearly all price categories. The hardest-hit
segment over the last year was wine priced between $8 and $9.99; by contrast, the growth rate in the ultra
value category rose again, while the $10 to $12.99 segment experienced higher growth (21%) than any
other segment, followed by wines $13 and above. Between 2007 and 2008, the $13 and above category
grew 8 percent. Year-on-year, domestic sales increased 5 percent and imported wine grew 4 percent in
the 52 weeks ending July 26, 2008.
Those wineries that performed the best in this market were either selling much of their wine through a
wine club or a retail tasting room, or had demonstrated a preemptive approach to the market to be sure
they were first in the market with their new vintage releases. Nevertheless, the very best quality wine
enjoyed modest sales growth with little impact on price. An obsessive attention to quality had evidently
paid off.
The biggest mistake some wineries had made during an earlier economic downturn in 2003 was to
develop a second label. The intention was that some excess wine could be declassified to a second label
(or a new blend under an existing brand) and forestall a certain loss on a bulk sale. Yet problems arose;
since so many wineries had selected this strategy, the channel became filled with a spate of new second
labels, forcing higher marketing dollars and greater focus on the second label instead of on the primary
label. Many wineries after 2003 resorted to discounts and promotional allowances for their second labels
in order to draw down inventories.
Channels of wine distribution continued to consolidate with more brands in the hands of fewer
distributors.
Wine industry outlook — 2009
Industry analysts forecasted a mixed market outlook for 2009:
 Intense foreign competition, particularly in the under-$15 per bottle price categories
 A moderating oversupply of domestic and international wine
BUS 592 — Spring 2010
o
o
o
o
o
Dr. Gilinsky/page 14
A continuing oversupply of grapes in California:
Cabernet Sauvignon would come into balance in 2009-2010
Chardonnay and Pinot Noir would remain in balance
Merlot wouldn’t come into balance for many years
Other varietals would remain in balance
 The market for key varietals (e.g., chardonnay, cabernet sauvignon, etc.) would remain strong:
o Chardonnay and Merlot — slowing growth
o Red Zinfandel — moderate growth
o Cabernet Sauvignon and Sauvignon Blanc — moderate growth
o Pinot Noir — continued growth
o Rhone varietals (Syrah, Grenache, Viognier, etc.) — growth on a small base
o Italian varietals (Sangiovese) — growth on a small base
o White Zinfandel — flat to negative growth
 Market growth across price segments would remain variable:
o 1% decline in the under-$6 per bottle category
o 5% growth in categories between $6 and under-$20 per bottle
o Declining sales in the over-$50 per bottle category
o Brands with momentum continuing to grow rapidly (e.g., Charles Shaw or Yellowtail,
priced at $1.99 per bottle)
o Brands without definition experiencing declines in sales
 Competition would remain fierce, as reflected in:
o Heavy discounting by large volume producers
o Increased promotional allowances
o Decreased levels of inventory at distributor and retail channels
Study Questions
1. What are the elements of a strategic plan?
2. What is the appropriate measure of success for businesses like Sonoma Crest Winery?
3. What does a SWOT analysis tell us about Sonoma Crest’s position to date?
4. Supposing the future of this business is on the line. What options are available to the owners/brothers
in 2004? What story should they tell Nancy Columbo? What story does she want to hear?
5. What do we learn from this case?
BUS 592 — Spring 2010
Dr. Gilinsky/page 15
BUS 592 — Spring 2010
Dr. Gilinsky/page 16
Ideal Venture Plan: Document Format
You are writing and presenting a venture plan. This document will ultimately be used to raise
capital from lenders or from sophisticated investors. Below are some specific areas of your
business that must be addressed in your one-page Executive Summary handout, nailed in your
“elevator pitch” presentations, and fleshed out in your team’s venture plan document.
Why Our Venture Exists & What We Plan to Achieve
 Vision & mission statements, incorporating values
 Brief description of product or service
 Legal structure, ownership & control
 Major milestones to be achieved & timetable; contingency plans
Situation (SWOT) Analysis
 Founders’ experience, roles, & responsibilities
 Patents on or patentable systems/information technology
 Key needs on the production/operations side
 Key strengths required on the sales/distribution side
 Other needs on the support side (e.g., finance, accounting)
Industry & Competitor Analysis
 Market survey: target market(s), size, growth rates, key success factors
 Profiles of direct and indirect competitors & their strengths & weaknesses
 Description of your competitive advantage
 How your competitive strategy supports the above
Marketing & Financial Goals
 Projected growth, size and share of market
o by region
o by product type
 Target customer/user profile
o demographics of typical customer/user
o why our product/service over others’?
o best performing product(s)/product type(s)
 Milestones
o Roll-out plan & time to breakeven
o Justification for growth rate & contribution margins
o Potential “second act” products or services
Financing(s) needed to accomplish goals (highlight or use graphs)
 Working capital requirements
 Long-term capital requirements
 Timing of cash inflows and outflows
 Top-line forecast
 Pro forma projections: income statement, balance sheet, cash flow, ratios
BUS 592 — Spring 2010
Dr. Gilinsky/page 17
Ideal Venture Plan: Presentation Format
The pitch must lead the reader to the conclusion:
 Large exciting potential market
 You are the right one to exploit it
Powerful concept, innovative solution for an emerging but important unmet customer need
VC Formula: Market Size x Market Growth x Your Contribution = Size
The Plan is Balanced and Believable
 Don’t bite off too much too soon with little "value-added" or define the served customer needs
too narrowly…
”your mission is too broad. It requires resources beyond what you’ll have for years”
“this is a narrow market; you’ll be vulnerable, small and trapped in a limited growth path”
Ideal: Profitability in the short-term and growing smoothly through a coherent product line and market
expansion
What is Most Important—“People, People and People”
Traits of the winners:
Leadership
Vision
Integrity
Openness
Dedication
A Good Match
Your plan is consistent with a prior investment
Your plan is where they want to go in the future
You don’t compete directly with a portfolio company
They have some expertise in the area
The Pitch
Do your homework before arriving
Short and to the point presentation
Be prepared for a grilling and act like you are enjoying it!
What is the problem or pain in the marketplace and how is your solution something better
Competition
Market assumptions
Comparison to other companies
Your personal background and the management team
Seven Mistakes to Avoid
1) Shallow or improper treatment of competitors
2) Not addressing obvious weaknesses
3) Not linking your venture with the larger trends
4) Focusing on a small market
5) Improperly or poorly prepared financials
BUS 592 — Spring 2010
6) Forecasting unrealistic growth
7) Failure to demonstrate progress
Dr. Gilinsky/page 18
BUS 592 — Spring 2010
Dr. Gilinsky/page 19
BUS 592 – Entrepreneurship & New Venture Creation
“Elevator Pitch” Scoresheet
REVIEWER”S NAME __________________________________
VENTURE TEAM NAME ________________________________
[Key: 1 = Poor; 5= Satisfactory; 10= Superior]
(Please circle rating in each section)
I. VENTURE DESCRIPTION
1
2
3
4
5
6
7
8
9
10
Provided a clear description of product or
service opportunity
Provided clear description of what’s
expected from audience
Specified problem & how product/service will
provide a solution
Total (0-10)
II. OPPORTUNITY ANALYSIS
1
2
3
4
5
6
7
8
----------------------------------
9
10
Easy-to-understand business model
Explained uniqueness of product &
competitive advantage
Plan to reach target markets & customers
Presented credible financial projections &
assumptions
Total (0-10)
III. IMPLEMENTATION PLAN
1
2
3
4
5
6
7
8
----------------------------------
9
10
Appropriateness of short & long-term goals
Feasibility and realism of: know-how, time, cost
Identified risks & contingency plan
Explained sources & uses of funds
Total (0-10) ____________________
IV. PRESENTATION STRATEGY
1
2
3
4
5
6
7
8
9
10
Executive Summary
Presentation, creativity, visuals, and effectiveness in Q&A
Total (0-10) ____________________
(Total possible points = 40 points)
Total (0-40) ____________________
BUS 592 — Spring 2010
Dr. Gilinsky/page 20
Bullshit Bingo
Do you keep falling asleep in meetings and seminars? What about those long and
boring conference calls? Here is a way to change all of that!
How to play: Check off each block when you hear these words during a meeting, seminar, or phone call.
When you get five blocks horizontally, vertically, or diagonally, stand up and shout BULLSHIT!!
Synergy
In the pipeline
Frienemy
Impact
investment
Bottom line
Monetize
Gamechanger
Key accounts
Out of the
loop
Go(ing) rogue
Value-added
Proactive
Win-Win
Think outside
the box
Tipping point
Market driver
Knowledge
base
Staycation
Drill(ing)
down
Shovel-ready
Game plan
Leverage
Traction
Addressable
market
Bandwidth
Testimonials from satisfied players:
"I had only been in the meeting for five minutes when I won." -Jack W. - Boston
"My attention span at meetings has improved dramatically." -David D. - Florida
"What a gas. Meetings will never be the same for me after my first win." -Bill R - New York City
"The atmosphere was tense in the last process meeting as 14 of us waited for the 5th box." -Ben G. Denver
"The speaker was stunned as eight of us screamed ‘Bullshit’ for the third time in 2 hours." - Kathleen L. Atlanta