AEM 3250 Assignment #2 Team members: Alex Woloshin, Linda Liu, Walker Diebolt Munchy Masters As a group, we determined

Munchy Masters to have the most promising business plan of the three. From the executive summary and business description, the storyline was vibrantly depicted and immediately gave a clear description of the business. Additionally, we appreciated the teams careful consideration of their business location, and we agreed that this would be a major contributor to reaching profitability. However, we would ultimately not invest in this business for several reasons. Among our major concerns are our reservations about the management teamspecifically, their lack of food industry experienceand the low barriers to entry in the snack food industry. With particular respect to the second concern, we are unsure if Munchy Masters would be able to scale up their operations quickly enough in order to establish strong market share and fend off competitors. Related to this point, we are concerned that the teams financial projections may be overly optimistic. For instance, we are skeptical that they will achieve their estimated numbers for average purchases per day, as these numbers are quite high. If they do not meet their sales projections, it is unlikely that the business will be profitable, as their products are inexpensively priced. These concerns may be overcome with a particularly strong value proposition; however, we found that theirs failed to focus on their biggest and most valuable differentiatorthe ability for a customer to customize their own food from start to finish. Our team rated the Munchy Masters business plan an overall 4 out of 5 possible points. Club Escape As a group, we thought that Club Escape was the weakest business plan of the three, and we would not invest in the business. Our concerns started with the executive summary, which failed to quickly and clearly convey the business concept. In addition, we found that the business description was rather vague, failing to explain in detail how the business would operate (i.e., logistics of events and activities). Furthermore, a major red flag for us was the limited hours of operations, which seriously restrict the businesss ability to generate revenues. We were unconvinced by the teams claim that additional revenues would be generated by renting the space out to third parties during non-operating hours, as they failed to specify how this business would be attracted and managed. Without these additional revenues, the club will likely struggle to achieve profitability. Among our other concerns are 1) high labor costs due to many security officers, 2) lack of an established advisory team, and 3) its location in an urban area with significant competition. To elaborate on the third point, we are unconvinced that Club Escape has a true competitive advantage (e.g., media room and video game room do not seem particularly unique or appealing to the target market, especially in light of the $10 entrance fee), let alone a sustainable one. Overall, we determined Club Escapes business plan to be a 2 out of 5. YG As a team, we decided that we would not invest in YG. Our major concern with YG is with the core business idea, with which we had several concerns. First, we do not agree with the stated target market of women in NYC who make over $45,000 annually; specifically, with the high cost of living in NYC, it seems unlikely that women could splurge on a luxury handbag for more than one occasion. Additionally, part of the appeal of luxury handbags is in the easily recognizable status that it conveys to the ownerthus, the attraction of established brands. Moreover, we think that there is dissonance between the productluxury goodsand the selling channelcasual, peer-to-peer sales. Finally, we are unsure that women would want to make a large purchase without first being able to interact with the product, which is impossible due to its customized nature. Ultimately, these concerns come down to hesitations over the management teams experience with the product and understanding of the target market, which has led to a questionable value proposition and business model. These concerns are underscored by certain details of the financials, such as the high projected sales and growth rates. Overall, we rated this business plan a 3 out of 5.

Appendix I: Scoring sheet for business plans

1. MUNCHY MASTERS Total Score (out of 5): 4 Would not invest Is the storyline clear in the executive summary? Does the management give the reader >> The storyline is clear. confidence they can execute the plan? >> Hesitant due to lack of food industry experience >> Would prefer if they had a franchise owner on their advisory board, and if Melissa Chau handled HR Does the business description give a clear idea Is there a well-defined and well-defended of the company and the product/service? competitive advantage and is it sustainable >> Yes: clear description of the product over time? >> Appreciate that they clarified their business >> No: low barriers to entry; seems unlikely structure as an LLC that they can scale up quickly enough to fend off competition Is there proof of a large enough market Is the economic logic clear? Do you segment? understand the revenue model and cost >> Yes, if their assumptions of number of mall structure? visitors, percentage who are in their target age >> We think their revenue model is overrange, and that their stand is in a high-traffic optimistic; cost structure could be leaner (e.g., area are correct. no benefits). Have they articulated the value proposition? Do the financials show well-justified demand >> A little unfocused, hitting on too many numbers and reasonable profitability? attributes. Would have liked the proposition to No: over-estimates of profitability and demand dial in down more on the core offering of (e.g., sales projections are very high) customization. >> Also unsure how valuable watching the process is to the customer. Does the business have adequate growth Does the company have positive cash flow? potential? >> Yes, if their assumptions are correct. >> Unclear. Malls are struggling in this environment, and there are low barriers to entry. 2. Club Escape Total Score (out of 5): 2 Would not invest Is the storyline clear in the executive summary? Does the management give the reader >> No: Unfocused difficult to immediately confidence they can execute the plan? understand what exactly theyre doing >> No: limited real-world business experience and no advisory board Does the business description give a clear idea Is there a well-defined and well-defended of the company and the product/service? competitive advantage and is it sustainable >> Somewhat, but needs more clear lay out of over time? how activities and events are structured. >> We were not convinced that they had a competitive advantage, let alone a sustainable one. Is there proof of a large enough market Is the economic logic clear? Do you segment? understand the revenue model and cost >> No: unconvinced that the target market is structure? appropriate for the services theyre offering Needs more thinking about those special events, which could either be a major source

Have they articulated the value proposition? >> Not saying anything specificno compelling value offering for the target market Does the business have adequate growth potential? >> No: not easily scalable/replicable in other locations

of revenue, or a huge cost if they do not happen Do the financials show well-justified demand numbers and reasonable profitability? >> No: over-optimistic Does the company have positive cash flow? >> Yes, if their assumptions are correct.

3. YG - Total Score (out of 5): 3 Would not invest Is the storyline clear in the executive summary? Does the management give the reader >> No: business model wasnt immediately confidence they can execute the plan? clear (e.g., manufacturing, peer-to-peer selling Yes: they only handle marketing business model) development Does the business description give a clear idea Is there a well-defined and well-defended of the company and the product/service? competitive advantage and is it sustainable >> Logistics a little unclear: the process by over time? which a customer orders a bag/the bag is made Yes, but not sure how valuable it is to and shipped is confusing customer Is there proof of a large enough market Is the economic logic clear? Do you segment? understand the revenue model and cost >> Unrealisticwe think they analyzed the structure? wrong market segment and were overoptimistic >> Revenue model is a little confusing; cost in their growth projects structure seems excessive (e.g., office space) Have they articulated the value proposition? Do the financials show well-justified demand >> No: didnt dial down on their key value numbers and reasonable profitability? offering of customization No: demand seems questionable Does the business have adequate growth Does the company have positive cash flow? potential? Yes, if their assumptions are correct. >> Projections are too aggressive, but if successful, could easily be grown into other markets

Appendix II: Group Contract

Group Contract Team: Alex Woloshin, Linda Liu, Walker Diebolt

The following contract outlines the Spring 2013 semester operating procedures for the Team consisting of Alex Woloshin, Linda Liu, and Walker Diebolt (hereafter referred to as the Team). The procedures are intended as guidelines for successful Team operation, with the purpose of preventing problems and solving conflicts. It is given that all Team members will treat each other with respect and trust, and conduct themselves with integrity and honor.

(I)

Meeting Times a. The Team will meet on Monday afternoons at 2:00 PM. This meeting time has been set aside for the entire semester, and is protected from all other commitments that may arise. b. All Team members are expected to arrive on time for the Monday Team meeting, and to stay for the entire duration of the meeting. c. Should the need for additional meetings become necessary, the Team must agree at the end of the Monday Team meeting when the additional meeting will be held. The Team has selected the following times as available time slots for additional meetings: i. Friday afternoons at 2:00 PM ii. Sunday afternoons at 4:00 PM d. The mentor for the Team is Professor Streeter. The Team will meet with their mentor on Tuesdays, from 11:00 to 11:30AM, or from 11:30 AM to 12:00 PM, or on Thursdays, from 11:00 to 11:30 AM.

(II)

Procedures for Conflict a. Conflicts will be discussed by Team members during Monday Team meetings. The following procedures outline solutions to several possible conflicts. i. Team member is unprepared for meetings: It is expected that all Team members will arrive to Monday Team meetings ready to participate in Team work. Adequate preparation for meetings includes having completed all necessary readings or action items scheduled at the prior weeks meeting, as well as bringing energy, insight, questions, and thoughtful, constructive criticism to the table. If a Team member fails to participate actively, the issue will be addressed immediately. If the issue occurs a second time with the same Team member, then the Team will notify the mentor at the next mentor meeting, and a new solution must be agreed upon then. ii. Team member is not completing his or her work in a timely manner: It is expected that all Team members will show care and respect for each other by completing his or her work in a timely manner. To prevent undue conflict over procrastination, the Team will outline action items during each meeting and establish a firm deadline for each item. If a Team member requires an extension, s/he must notify the other Team

members in advance at least 12 hours before the deadline and secure both of their permission for an extension. If a Team member fails to meet a deadline, the Team will follow the procedure outlined next. iii. Team member is not doing his or her work: If this situation occurs, Team members must raise the issue at the next Monday Team meeting. Following that meeting, the Team member in question will have seven days (until the following weeks Monday Team meeting) to catch up on their work, to a standard acceptable to the other two Team members. If, at the second meeting, the Team member has completed their work satisfactorily, the conflict has been resolved and no further action will be taken. If the Team member has not completed their work satisfactorily, then the Team will send an email to the mentor immediately to request an appointment for conflict resolution. iv. Team disagreement: 1. Two members disagree and refuse to work together: An emergency meeting will be automatically scheduled for the soonest available time. If the disagreement cannot be resolved at the emergency meeting, then the Team will immediately notify the mentor and request a mentor meeting. 2. All Team members disagree and refuse to work together: The Team will immediately notify the mentor and request a mentor meeting. v. Firing of a Team member: Dismissal of a Team member will occur only under the most extreme of circumstances. The possibility of firing only emerges if the Team has undergone two processes of conflict resolution: 1) the internal procedure outlined in the Team contract, and 2) the solution proposed at a mentor meeting. In the event that these two processes have both failed, and the conflict continues, then either of the other two Team members may propose dismissal of the third Team member at the next Monday Team meeting. If both Team members agree that dismissal should be considered, then the Team will immediately notify the mentor and request a mentor meeting, at which time the issue will be decided. b. Because the above procedures do not cover all possible conflicts, we must retain some flexibility for conflict resolution. In the event of an unforeseen conflict, for which the resolution procedure has not been outlined above, the Team will discuss the conflict at the next Monday Team meeting. All Team members must agree to a solution to the conflict by the end of the meeting. In the event that the Team members fail to reach a consensus on a solution, then the Team will inform their mentor of the conflict prior to dissolving the meeting and request an appointment to discuss the conflict by email. c. In all occurrences of a conflict, documenting notes will be entered into the meeting minutes. (III) Procedures for Memos a. Unless otherwise stated, Linda Liu will act as the secretary at all Team meetings. She will take notes either on the computer or by hand. If notes are taken by hand, Linda will transcribe the notes into an electronic file within 8 hours. An electronic copy will be sent to all Team members within 12 hours. b. Team members Alex Woloshin and Walker Diebolt are to confirm their receipt of the memo and acceptance of its contents within 8 hours of Lindas sending. After receiving their confirmation, Linda will upload the memo to the course site and theideastartup.com site. c. Every memo will contain the following information: date, start time, location, attendees, action items from previous meeting, general notes, and action items to be completed for the following meeting.

i. The action items are delegated tasks and responsibilities for each Team member to complete. Unless otherwise stated, the deadline for these action items is the following Monday Team meeting. (See Procedures for Conflicts if Team members fail to meet deadlines or do not complete their work.) (IV) Procedures for Communication a. Primary: The primary mode of communication will be email. All emails must include all Team members; there will be no secret communications between two Team members. All emails require a response, even if only to acknowledge receipt. Acceptable turnaround time for email is eight hours, and Team members are expected to check their email a minimum of three times a day. b. Secondary: The secondary mode of communication will be text messaging. Text messaging will be mostly limited to establishing meeting logistics (e.g., location); important Team information will be communicated only through email, to ensure proper documentation.

We, the undersigned, as members of the Team, agree to abide by the terms of this agreement as long as the Spring 2013 AEM 3250 class permits.

X______Alex Woloshin_______________________________________

X______Linda Liu___________________________________________

X______Walker Diebolt_______________________________________