In MGMT 164, Introduction to Entrepreneurship class with Professor Robert Eberhart, who is a Stanford Technology Venture Fellow, we got the opportunity to do the $5 startup project. In this project, using the seed investment of $5, we formed groups of six students and competed to see which group can raise the most money in a week. This project is also done at Stanford GSB.
Every group ended up selling some type of food in different ways, with half of the groups selling In-n-Out burgers. My group won by bringing in the highest profit of $400. In addition, we achieved the highest margin per order, and the most money raised per hour of operation.
Factors of success:
Operational and logistical efficiency
Product & Pricing
In-N-Out: Double-double + fries + drink
Poke bowl: Most popular toppings (No customization)
Negotiated a discount for bulk orders. Explained that it was for a school project and that all profit will be donated to the Multiple Sclerosis Society.
Late night delivery charge: $2 per order (explained in Place/logistics)
We selected these two items because they were both less than 10 minute drive from the campus, and ensured smooth trip with no traffic.
Set price at $15 for both items for the sake of simplification.
Reasons why we set the prices very high:
(1) Majority of students at Santa Clara University live in the dorms and do not have a car.
(2) Students do not plan for what they want to eat a day or even hours in advance, and we did not want to place orders in advance in order to avoid leftover inventory.
(3) Only 3 out of the 6 members of the group had a car. By setting the price slightly higher than equilibrium pricing, we were also able to keep the quantity of orders manageable.
Used Google Forms for taking orders, and Venmo for payment.
We operated only in 2 windows, dinner (6-7PM) and late-night (9-11PM), to ensure high return per hour of operation.
Instead of delivering individual orders, we set up a pick-up spot in front of the library, which is also adjacent to the road. 3 people drove, and dropped off the items by the library. 2 people set up pick-up tables in front of the library, and picked up the food from the cars as they arrived. 1 person monitored the order spreadsheet, and texted the orders to the drivers.
Another benefit of setting a pick-up spot by the library is because it is right across Benson, which is the dining hall. Between 6-7PM most students are out of class, and this area has the highest foot traffic. As a result, a lot of students saw us or other students carrying the food they picked up food from us (free publicity).
However, for late-night orders, due to lower order volume, we delivered to each customer directly for additional $2 delivery charge.
By setting a $2 delivery charge, we were able to increase the quantity per order. Students who live in the dorms live with 3-5 other students. Those that lived in off-campus houses usually live with more than 5 other students.
We created snap codes with bit.ly links that linked directly to the order form. We enlarged these snap codes and distributed them effectively on campus. i.e. Inside of elevator door, in bathrooms inside the stalls and on mirrors (especially inside the cafeteria bathrooms), on the desks and monitors in the study area of the library.
By turning bit.ly URLs into snap codes, students could scan it and send to their friends at the same time.
Profit: $400 (Highest in class)
Average profit per order: $6.58
Margin: 43.9% (Highest in class)
Total hours of operation: 6 hours (Lowest in class)
Project kicked off on Thursday, but we only did delivery on Saturday, Sunday, and Monday. We didn't start until Saturday because we did all of the marketing Thursday-Saturday. We also had other school work, so we placed more emphasis on productivity and profit per hour of operation.
Profit per hour: $66.67
Average quantity sold per hour: 10.13
Where other groups fell short
Delivered every order individually.
Bought In-n-Out burgers in bulk and went to parties to sell.
No longer fresh
Required microwave but most houses only have 1 (poor customer experience)
Charged too low and received excess demand that couldn't be fulfilled.