There’s a new reason for creating that great business plan… prize money! If the possibility of commercial success (or failure) isn’t inspiration enough to do your basic business homework, perhaps you should consider the financial incentives offered to budding business planners. Scores of Australian organisations now hold annual business plan competitions, where entrants compete for cold hard cash… and the honour of being named ‘most likely’. By Pi James.
Interested in getting your new venture capable, competent, connected and cashed up? Business planning competitions abound, and have been responsible for giving a leg up to new companies marketing everything from a portable physio to nail-free decking, and ranging from the local, such as Zork (a corkless wine ‘cork’ developed in South Australia), to the global, such as Invario (a traffic managing software company now based in Boston).
While business planning competitions began with the big names in the US – such as the US$50,000 MIT Entrepreneurship Competition (now the US$100,000 Competition) and Moot Corp (University of Texas) – their significance and number have been growing in Australian universities since the late 1990s. A Federal Government push for an increased emphasis on entrepreneurship in MBAs has only fuelled competition growth.
While having their own individual intricacies and rules, business planning competitions use networking, mentoring and workshops to pit academic knowledge against real-life practicality. Judges are often drawn from the VC community or the upper echelons of corporate power. The cash prizes are intended to support the commercialisation of the winning business plan, so are usually released in increments linked to the accomplishment of milestones outlined in a launch plan.
THE BIG LEAGUE
The so-called “Godfather” of Australian business planning competitions is the University of Queensland’s Enterprize, with a $100,000 “walk-away cash prize”.
Head of UQ Business School Tim Brailsford says the decision to make UQ’s prize so substantial was in recognition of the large amount of capital that is needed to establish a business.
“We wanted to put a figure up that was going to make a significant difference to any business and that’s why it is a winner takes all… (rather than) first, second or third place,” says Brailsford.
“Which is pretty much the same in business, the winner does take all.”
While the rest of the competitions do not have such high stakes, some enter the international arena, such as the Queensland University of Technology’s (QUT) John Heine Entrepreneurial Challenge (formerly Moot Corp Australia), whose winner goes on to compete in the “Super Bowl of World Business Plan Competitions”, the Moot Corp Challenge at the University of Texas in Austin.
Head of Queensland University of Technology Graduate School of Business and John Heine Challenge director Evan Douglas says the fact that past Australian teams have won the Texan competition has proved “that Australian MBA programs turn up programs, business plans and business concepts that are as good as Harvard, Stanford, Wharton, and the London Business School”. It also gives Australian teams a chance at a bigger slice of the pie, with winners of Moot Corp International taking home US$100,000 in cash and prizes.
While the cash is tempting, and the dollar signs are probably the first attraction to entering, there seems to be general consensus that the most valuable part of the competition is the process, which involves an immense amount of networking and learning.
Melbourne University Entrepreneurs’ Challenge President Owen Tracy concedes, quite tongue in cheek, the prize “has got to come into it somewhere” but argues “the prize is secondary to the exposure you get” from competing within the business community.
Brailsford agrees. “Enterprise is not just about the winner. Every year we get extremely positive feedback that there is significant value just from having gone through the process itself, enabling entrants to get their business concept to a position whereby they can essentially pitch for, and be competitive in attracting, external funding.”
RMIT Business Plan Competition Manager Mary Atchison says the longer term benefits of taking part are not fully realised until the entrants are more involved in the process, or even until the competition is over, once the networks have been cultivated and become firmly established
“I don’t think you realise how important the actual process is until you get through and you’ve got a network of people around you that you were introduced to through the competition,” she says.
THE MEANS TO THE END
While the journey is surely beneficial, the destination holds promises of greater rewards and the experts concede that to win the grand prize entrants must have the whole package, including a strong team.
According to Tracy, “It always comes down to the team.”
“The team is vital in running any business. The judges see hundreds or even thousands of pitches a year, so at the back of their minds they’re asking, ‘who are these people, what have they done in the past, do I believe they will succeed and are they trustworthy.'”
Atchison agrees. “You can have the idea but not the team and you might not get too far.”
Douglas says for his competition successful entrants need to be “Mootcorpable”. “They obviously must have proprietary intellectual property – a patent would be best. They need to have a really good business model and it needs to be scalable to international markets.”
“To go to Texas with something that will sell in Australia won’t win in Texas. It’s got to be something that they can see has a global market,” says Douglas.
RISKS AND EGO-PRENEURS
Even with a fantastic idea and a cohesive team, problems can still arise, particularly when entrants have unrealistic expectations.
“There have been research studies that show that entrepreneurs suffer cognitive biases, and the worse cognitive bias is over-confidence,” says Douglas.
“This over-confidence makes them predict higher incomes and better outcomes and less risk than is true if someone takes an objective look at the facts.”
However, “it has also been indicated that most businesses would never get started if the entrepreneur wasn’t over-confident. So one of the vital things (in the competition) is tempering the over-confidence of the individuals to protect them from themselves, but to also be very careful not to temper it too much so that they think. ‘Oh well, it’s not worth it.’
“You want them to say, ‘Well there’s a bit of risk there but I can mitigate that risk in the following ways.'”
Brailsford refers to the hubris of some entrants who have a tendency to believe that their product is superior to anything else that mankind has ever seen.
“While this is understandable because this is essentially their baby, they fail sometimes to recognise that perhaps the general market place may not fall in love with their product or service to the extent that they have.”
Douglas also emphasises the need for business training or collaboration with business trained team members, and this is where the business competitions come into play.
“We’re constantly finding inventors and so-called entrepreneurs, who have no businesses training, experience or business skills, who go into these incubators with this fabulous technology and yet they know nothing about marketing, sales, budgeting, human resource management or leadership,” says Douglas.
“That’s why we try at the early stages (of the competition) to marry up business students with science or engineering students – to get that important balance.”
NOT JUST FOR STUDENTS
While these competitions are generally run by universities, and the majority require a student to be part of the entry team, the student does not necessarily have to be the founder. This leaves room for those non-university-enrolled entrepreneurs who want to combine their entrepreneurial drive with the business savvy or marketing spin of an MBA or marketing student to develop a competitive entry.
Some competitions, such as Enterprize, use a web-matching site or what is colloquially called “a business dating site”, where businesses seeking particular skills or expertise can put out a call for expressions of interest, which individuals/students can respond to.
This, Brailsford explains, is “geared around trying to optimise the right set of skills for any of the businesses”, to ensure success in the competition.
STRENGTH IN NUMBERS
Owen Tracy says one of the limitations of the growth in Australian competitions is that “you’re all just competing for the same talent”. He believes a more integrated approach to competing would result in bigger prizes, more in-depth attention and ultimately more competitive businesses.
Tracy hopes that moves can be made to recognise that it may be beneficial to work with each other.
But there are those that argue the current range and diversification of business planning competitions is better for collaboration and trial and error.
Atchison says RMIT had thought about a national competition a few years ago, but decided against it because there “is greater value in diversity, and we each have our own communities we want to contribute to. If you had a national competition, that’s almost like saying you only have one chance, but an idea might not work the first time.”
For instance, you might be a Melbourne University student who entered (the MUEC) and it did OK there but not very well, and then you polished it and then worked with an RMIT student to enter in the RMIT competition and went on to Big Ideas or Moot Corp in the States.
“Entrepreneurship is about doing many things – having ideas, testing ideas, screening them, writing the plan around them – and the publicity’s fantastic.”
And there are still hopes for bigger prize pools.
Despite UQ’s lucrative offerings, Brailsford says even $100,000 can be burnt through fairly quickly.
“What I would like to see is the ability for those businesses to link immediately with some significant angel investors and perhaps some early stage VC funds.”
With the Federal Government having recently released a “Best Practice Guide” for setting up Business Planning Competitions, and more universities throwing down the gauntlet, it seems the future for business competitions can only continue to grow.
So what are you waiting for? Game on.
For more information see the National Innovation Website which has links to competitions around the country: www.innovation.gov.au.