Business

The University of Texas at Austin holds an annual competition called Moot-Corp in which MBA students submit model business plans to be evaluated for quality. This competition has produced winners whose business plans serve as models for any party interested in developing a plan that would interest lending institutions, investors or venture capitalists.

The first of these plans, the plan for 2MBA, Inc. won the world championships of the Moot-Corp competition in 2009. This plan was selected for a number of reasons. First, the plan is comprehensive. It consists of an executive summary, an analysis of the offer for investors, an overview of the products and services offered by the company, and an overview of the organization of the company. (2MBA Inc. 2009) Additionally, the plan includes a strategic analysis of the industry conditions. In this case, the industry in question is beverage equipment for sale to food-industry companies. (2MBA Inc. 2009)  The strategic analysis includes an outline of the macro-environment for product potential, as well as an analysis of the market environment illustrating a growing need for the product being offered. (2MBA Inc. 2009) Also included in this section is an evaluation of both current and potential competition in the market for products and services offered by 2MBA, Inc. The plan then identifies key strategic advantages in the corporate venture including potential for growth and rationale for success. (2MBA Inc. 2009)  A strength of this plan is the explicit expression of the reasons that the company will succeed. The reasons set forth include an alliance with an established food-producing company, innovated products and a committed management team (2MBA Inc. 2009). The strategic keys section also points out the basis for company growth, in this case, geographic expansion and innovations in beverage-dispensing technology. (2MBA Inc. 2009)

This plan also includes a detailed marketing plan for the business, which adds credibility by showing that the planners have thought through a detailed marketing strategy for the company, a vital component in the launching and maintenance of a new business. (2MBA Inc. 2009)  2MBA Inc.s marketing plan includes general strategies for the companys first five years of existence. These strategies are specific enough to be actionable, but general enough to adapt to contemporary economic and market conditions.  (2MBA Inc. 2009) The plan for product production is also laid out in great detail in this plan. It is summarized in the text, and quantified in detail in one of the appendices. (2MBA Inc. 2009) Also included are organizational and financial plans with detailed supporting documentation included in the appendices. (2MBA Inc. 2009)

Perhaps the most compelling portion of this business plan is the risk analysis and the use of the S.W.O.T analysis of business potential. (2MBA Inc. 2009) The risk analysis includes a frank examination of the possible pitfalls in the business venture and proposed solutions to either prevent or mitigate the damage from these obstacles. (2MBA Inc. 2009) The  S.W.O.T. analysis is a listing of the Strengths, Weaknesses, Opportunities and Threats endemic in the business plan and includes the manners in which management will go about dealing with these elements as well. This section articulates many elements of the plan previously noted, but does so in a quick-reference manner for ease of consumption by the reader. (2MBA Inc. 2009)

This plan does an exemplary job of illustrating that a full and thorough analysis of all the conditions involved in the successful formation and maintenance of a business. A potential investor may rest assured that the management has considered the prospect from every angle, has evaluated the risks, and has planned for contingencies based upon favorable and unfavorable outcomes.

A former champion from the Moot-Corp competition in 1999 was the business plan for a company called Fabrica, Inc. (Fabrica Company, Ltd. Business Plan, 1999)  While also a strong and organized plan, it differs in style, format and organization from that of 2MBA, Inc.  Throughout this business plan, the details, figures, graphics and other ancillary materials are given on the spot, rather than referred to appendices. (Fabrica Company, Ltd. Business Plan, 1999)  The executive summary begins with a rhetorical question about the industry, and proceeds to offer the plan as the best answer to this question. The industry involved here is the use of a specialized loom to produce fabric samples of relatively small size and low cost. (Fabrica Company, Ltd. Business Plan, 1999)   The summary does a good job illustrating that while a market exists for such a function, currently no company provides it. (Fabrica Company, Ltd. Business Plan, 1999)

The Fabrica business plan includes a section called Company in which the background, mission and scope of startup are summarized. (Fabrica Company, Ltd. Business Plan, 1999)   This section is effective as a summary, but has less appeal to the cut to the chase investor.  (Fabrica Company, Ltd. Business Plan, 1999)  The People section consists of graphic representations of the table of organization of the company and the division of investor capital. Compared to 2MBAs plan, this method seems to be less focused and organized. Specifically, it is difficult to discern exactly what will be covered in each section of the plan on the basis of titles such as People, Product, and Market. (Fabrica Company, Ltd. Business Plan, 1999)  Nevertheless, the vital elements of organization, financing, and marketing are discussed in detail throughout this plan. The analyses of both the existing market, and the strategy of Fabrica over the next five years are detailed and specific. The marketing strategy lacks the flexibility illustrated by 2MBAs plan, in that it delineates monetary goals rather than developing future strategies.

Perhaps the biggest deficiency in this plan as compared to others is the inherent disregard for potential risks and pitfalls both in the general economic climate, and the specific field in which Fabrica intends to operate. Two key obstacles are not addressed the first is the potential for competition, and the second is the development of new technology which may render the service offered by Fabrica obsolete.

The Fabrica business plan is much more focused on financial projections involving cash flow and incremental returns. (Fabrica Company, Ltd. Business Plan, 1999)  This information is good to have for potential investors, but it comes at the expense of  detailed risk analysis. Also, the numbers offered seem to be spun out of whole cloth, with little rational given for the exponential increase in sales over five years. Another weakness of this business plan is that it lacks a longer-term vision, or a growth plan like the one articulated in the 2MBA plan (Fabrica Company, Ltd. Business Plan, 1999)  . The Fabrica plan projects financial growth without providing a clear methodology for obtaining this growth. It is clear that if this business plan competed in the same year as 2MBAs plan, it would not have won the competition. Despite the differences in the industries addressed in the two plans, both should have offered some insight as to potential hazards of the future and how the company plans to deal with them. 2MBA, Incs plan had such considerations, while Fabrica, Ltd.s plan did not.

In the same year as Fabricas plan won the competition, the first runner-up was the plan of  Vusion, Inc. This company is intended to market a chemical analyzer and cartridge to fine chemical producers. (Vusion, Inc. Business Plan, 1999) This product is to perform an analysis of chemical composition instantly and accurately, which would allow chemical manufacturers to operate more efficiently, produce higher quality product, and respond rapidly to processing problems. (Vusion, Inc. Business Plan, 1999) The plan gives a good analysis of the current market for technologies that perform comparable tasks and point out the weaknesses in the alternatives. (Vusion, Inc. Business Plan, 1999)   Because this company seeks to occupy a position in an existing market with a  different product, the marketing strategy should be as detailed and robust as possible. In this case study, the marketing strategy is delineated only in general terms, however, the authors acknowledge the existence of competition, and the need to make initial inroads into the market. (Vusion, Inc. Business Plan, 1999) The authors have clearly made a more detailed study of their own manufacturing strategy than of a marketing strategy. (Vusion, Inc. Business Plan, 1999) This lack of balance may account for why the plan placed second in the competition.

Among the three plans examined, it is clear that the most superior one by far is 2MBAs business plan. Even taking into account the differences in the various fields described in the plans, 2MBA offers the most compelling detail of both current and future plans for the company. The two areas that need to receive the most attention in a business plan designed to attract investors are marketing strategy and production strategy. All three of these plans address both categories in some detail. Fabrica and Vusion focus more detail on manufacturing than on marketing. This is a weakness in those business plans. Investors are more interested in how the product will be sold than in how it is made. Certainly, investors would be reassured by the existence of a detailed manufacturing plan, but the selling point of these businesses has to be marketing strategy. It is in this area that the plan of 2MBA,Inc. is superior to the others. In addition to the detailed marketing plan, this m business plan offers specific projections of potential problems and real solutions to those problems. The use of SWOT analysis is an extremely handy thumbnail summary of these components of the marketing landscape. Neither Fabrica nor Vusion gave significant though to potential difficulties in present or future markets. While presenting uniformly optimistic projections may inspire confidence in investors, the practice may turn those investors to the attitude that the authors of the plan are naively blind to the potential hazards. By acknowledging and answering those hazards, 2MBAs business plan offers superior  insight.

In considering these plans, it is vital to recall their purpose, which is to convince investors that the company is worthy of their money. In so doing, the authors must show that not only is their company viable, but its personnel are savvy business people as well. Offering only optimistic projections and downplaying risks may make the company seem more attractive at first, but eventually, investors will gable their money on the strategists behind the product.