Transcript Session 8 - Zipcar

Zipcar: Refining the Business Model
Elevator Pitch
• Objective
. . . . . . . tell me more.
The Logic of Analyzing New Venture Opportunities
Source: Mullins, J.W. (2003). The New Business Road Test. Prentice Hall: London
Market domain
Industry domain
Potential
Profitability
of opportunity
Is the market large enough?
What is the growth rate and
the upside potential?
Market
attractiveness
Industry
attractiveness
Macro-level
Does the opportunity fit the team’s
business mission, personal
aspirations, and risk propensity?
Mission, aspirations,
Ability to execute
propensity for
risk
Team
domain
Venture
strategy
Connectedness up,
down, and across value chain
Micro-level
Target segment benefits
and attractiveness
Sustainable
advantage
What industry forces have the
strongest impact on profitability?
How are industry forces likely
to change in the future?
Does the team have what it takes,
in a human sense – in experience
and industry know-how – to deliver
superior performance for this
particular opportunity?
To which target market Is the
venture’s value proposition
particularly compelling?
Is the target market large enough to
support the business model?
Does the target market provide an
Option to grow into other markets?
Is the team well connected up, down
and across the value chain so it will
be quick to notice any opportunity or
need to change its approach if
conditions warrant?
What entrepreneurial or firmlevel capabilities create a
sustainable competitive advantage
relative to rivals or potential rivals?
Market Attractiveness
• Size
• Growth rate
– Past
– Future
• Trends
– Economic, demographic, socio-cultural,
technological, regulatory, natural
Industry Attractiveness
•
•
•
•
•
•
What industry?
Ease of entry?
Supplier power?
Buyer power?
Substitute products?
Rivalry among existing firms?
Segment Benefits / Attractiveness
• Customer pain? Incentive to buy?
• Who are the customers? What do we
know about them?
• Benefits above other solutions?
• Will they buy?
• Will the segment grow?
• Other related segments? Can we serve
them?
Sustainable Advantage
• Proprietary elements?
• Superior processes, capabilities,
resources?
• Economically viable business model?
• Customer acquisition? Costs? Speed?
• Customer retention?
Evaluating Performance (Per Car)
Monthly Figures
May Plan / Sept Actual
On per car basis
Total Revenue Revenue/Car
Number of Cars –
Contribution/Car
Cost/Car
Lease
Access Equip.
Insurance
Parking
Maintenance
Fuel
Evaluating Performance (Per Car)
Monthly Figures
May Plan / Sept Actual
On per car basis
Total Revenue - $27,104 / $14,645
Revenue/Car
$2,259 / $1,003
Number of Cars – 12 / 14.6
Contribution/Car
$1,536 / $225
Cost/Car
$723 / $778
Lease
Access Equip.
Insurance
Parking
Maintenance
Fuel
$367 / $400
$42 / $42
$142 / $142
$50 / $63
$33 / $33
$90 / $99
$723 / $778
Evaluating Performance (Per Member)
Monthly
May Plan / Sept Actual
Revenue/
Member
Monthly Fee -
Monthly Usage
Per Hour Fees
Per Mile Fees
Monthly Interest
Contribution/
Member
Security
Interest
Cost/Car
Cost/
Member
Members/Car
Evaluating Performance (Per Member)
Monthly
May Plan / Sept Actual
Revenue/
Member
$130 / $94
Monthly Fee - $6.25 / $6.25
Monthly Usage $
$123 / $ 87
Per Mile Fees $35.2 / 13
Monthly Interest
$1 / $1.1
Contribution/
Member
$91 / $27
Per Hour Fees $88 / $73
Security $300 / $300
Interest .33 / .37
Cost/
Member
$39 / $67
Cost/Car
$723 / $778
Members/Car
18.33 / 11.62
Diagnosing the Problem
Hourly vs. Daily (September)
Exhibit 8b
Hourly $9,327/1,351
=
$6.90/hour
Revenue from hourly use / hours used
Daily
$5,318/1,872
=
$2.80/hour
Revenue from daily use / hours used (not hours billed)
Epilogue
• Robin was concerned when her analysis showed low
revenue figures, driven primarily by the daily use of
vehicles.
• Beginning in December, Zipcar increased the max daily
rate from $45 to $55, increased the lowest hourly rate
and changed from two-tier to four tier pricing.
• Still in business (http://www.zipcar.com/index)
– 36 US cities and London
• Appears that they did not get any venture capital funding
until July 2005 ($10 million)
(http://www.zipcar.com/press/releases/press-28)
• Raised $25 million in 2006
(http://www.redherring.com/Home/19957)
• http://gigaom.com/cleantech/zipcar-prices-ipo-at-14-to16-per-share/
Takeaways
• Keep business model fluid in early stages
• Understand factors that provide
sustainable competitive advantage
– Network externalities*
– Reputation and buyer uncertainty*
– Buyer switching costs*
– Legal restrictions (e.g., patents)
• Odd financing strategy? Not really.
* First mover advantages
Reminders
• Read “Writing a Business Plan: The
Basics”