Transcript Advanced Venture Business

Class 10
Business Models
& Strategy
NBC1 2008, (c) 2008 Jay A. Smith
1
Class Schedule
4/15(火)16:10-17:40
4/22(火)16:10-17:40
5/13(火)16:10-17:40
5/27(火)16:10-17:40
6/3 (火)16:10-17:40
6/10(火)16:10-17:40
6/17(火)16:10-19:20
6/24(火)16:10-17:40
① Intro to Venture Business & Industry Analysis
② Intel Case Study
③ Sales & Marketing
④ Sales & Marketing Case Study
⑤ Marketing Project Presentations
⑥ Ideas and Innovation
⑦⑧Product & Service Presentations / Finance & Accounting
⑨ Finance & Accounting (continued)
7/1 (火)16:10-17:40
7/8 (火)16:10-19:20
7/15(火)16:10-17:40
7/22(火)16:10-19:20
⑩ Business Models & Plans
⑪⑫Elevator Pitches / Investment & Valuation
⑬ Presentation Workshop & Review
⑭⑮Presentations 2 Classes
Final Report: Team Business Plan Paper By July 29 (火）
Office Hour:
Ｔｕｅｓ： 13:30-15:00 VBL 2F 電話285-3630
NBC1 2008, (c) 2008 Jay A. Smith
[email protected]
2
Model Driven Pro-Forma P&L
Month
Assumptions for Model
3,000 acquisition cost
5% attrition per month
ISP
1
2
3
4
5
6
7
8
9
10
11
12
Past Members
0
333
650
951
1,403
1,833
2,241
2,796
3,323
3,823
4,299
4,751
New Members
333
333
333
500
500
500
667
667
667
667
667
667
Lost Members
0
(17)
(33)
(48)
(70)
(92)
(112)
(140)
(166)
(191)
(215)
(238)
333
650
951
1,403
1,833
2,241
2,796
3,323
3,823
4,299
4,751
5,180
3,000
3,000
3,000
3,000
3,000
Total Members
Fee/Member
Member Revenue
5,180
2,000
3,000
3,000
3,000
3,000
3,000
3,000
666,667
1,950,000
2,852,500
4,209,875
5,499,381
6,724,412
8,388,192
9,968,782 11,470,343 12,896,826 14,251,984 15,539,385
0
0
0
0
1,000,000
1,000,000
2,000,000
2,000,000
4,000,000
20,000,000
666,667
1,950,000
2,852,500
4,209,875
6,499,381
7,724,412 10,388,192 11,968,782 14,470,343 15,896,826 18,251,984 19,539,385
114,418,347
1,000,000 each 1,000 members Ad Revenue
Total Revenue
Year 1
3,000,000
3,000,000
4,000,000
94,418,347
Support
1 per 100 members
200,000 per staff
# of Staff
3.33
6.50
9.51
14.03
18.33
22.41
27.96
33.23
38.23
42.99
47.51
51.80
Cost/Support
200,000
200,000
200,000
200,000
200,000
200,000
200,000
200,000
200,000
200,000
200,000
200,000
Staff Salary
666,667
1,300,000
1,901,667
2,806,583
3,666,254
4,482,941
5,592,128
6,645,855
7,646,895
8,597,884
9,501,323 10,359,590
63,167,787
1,000,000
1,000,000
1,000,000
1,500,000
1,500,000
1,500,000
2,000,000
2,000,000
2,000,000
2,000,000
2,000,000
2,000,000
19,500,000
800,000
800,000
800,000
800,000
800,000
1,200,000
1,200,000
1,200,000
1,200,000
1,200,000
1,200,000
1,200,000
12,400,000
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
12,000,000
9,792,128 10,845,855 11,846,895 12,797,884 13,701,323 14,559,590
107,067,787
budget
Marketing
budget
R&D
budget
SG&A
Operating Exp.
Operating Profit
3,466,667
4,100,000
4,701,667
6,106,583
6,966,254
8,182,941
(2,800,000)
(2,150,000)
(1,849,167)
(1,896,708)
(466,873)
(458,529)
596,064
1,122,927
2,623,448
3,098,942
4,550,661
4,979,795
Strategy Implication: Get More Members Sooner
NBC1 2008, (c) 2008 Jay A. Smith
51.80
7,350,560
3
Key Expenses

Cost drivers (what factors affect costs)







People: Staff Salaries (full-time, part-time), contractors…
Things: Supplies, parts, equipment, facilities…
Activities: Manufacturing, Selling, Marketing/Advertising, R&D…
Relative size? Importance?
How predictable? How will they change over time?
How flexible, adaptable?
Types:




Variable (changes directly to volume)
Semi-variable (increases in step-wise fashion)
Fixed (do not change with volume of sales)
Non-recurring (unusual or infrequent expenses)
NBC1 2008, (c) 2008 Jay A. Smith
4
Sample Pro-Forma Cash Flow Forecast
From
6月
1月
Units Sold
Avg. Unit Price
Sales
Cost of Sales
Gross Profit
10%
60%
2月
3月
4月
5月
6月
0
10
100
10
150
10
200
10
300
10
400
12
0
0
0
1000
600
400
1500
900
600
2000
1200
800
3000
1800
1200
4800
2880
1920
200
600
50
50
(500)
200
400
50
100
(150)
7月
10%
440
12
8月
9月
10月
11月
12月
2年
1年
3年
484
12
532
12
586
12
644
12
709
12
4,545
11.7
9,000
12
15,000
12
5280
3168
2112
5808
3485
2323
6389
3833
2556
7028
4217
2811
7730
4638
3092
8503
5102
3401
53,038
31,823
21,215
108,000
64,800
43,200
180,000
108,000
72,000
SG&A
R&D
M arketing
Depreciation
Operating Profit
200
500
10
10
(720)
200
400
600
100
(500)
200
300
600
100
0
300
300
600
100
620
300
300
800
120
592
300
300
800
120
803
300
300
600
120
1236
300
300
600
140
1471
300
300
400
140
1952
300
400
400
140
2161
3,100
4,400
5,510
1,240
6,965
6,000
8,300
11,010
2,470
14,651
11,800
16,000
21,970
4,890
29,801
NonOper. Inc.
Pretax Profit
Taxes
Net Income
30
50
70
100
(470)
(100)
(430)
(620)
(lets assume no taxes)
(470)
(100)
(430)
(620)
20
20
10
630
(20)
572
20
823
(50)
1186
20
1491
20
1972
30
2191
20
630
572
823
1186
1491
1972
2191
300
7,265
0
7,265
500
15,151
0
15,151
930
30,731
0
30,731
100
0
100
500
120
0
120
0
120
500
1,240
3,050
2,470
5,100
4,890
9,200
943
692
230
120
(370)
(50)
(1,610) (1,380)
(1,610) (2,990) (3,040) (3,410) (3,290) (3,060) (2,368) (1,425)
total finance needed
806
(619)
Depreciation
Capital Expenditures
Cash Flow
Cumulative Cash
+
ー
10
1000
50
1000
100
50
100
0
140
0
1,631
1,012
140
0
2,112
3,124
140
0
2,331
5,455
5,455
5,455
• Depreciation: accounting method to expense cost of an asset. “Non-cash” expense
business size at any given time. 11月 run-rate= 644 x 12 = 7,728
NBC1•2008,
(c) 2008 Annualized
Jay A. Smith
Run-rate:
12,521
17,976
5
26,421
44,398
Breakeven
How much does company need to sell to cover its costs
Revenue = Costs
Profit/loss = 0
Money
Money
Potential
Profit
Reward
Losses &
Investments
Breakeven
NBC1 2008, (c) 2008 Jay A. Smith
Time
Potential
Profit
Reward
Losses &
Investments
Time
6
Using Breakeven
Sense of risk
 How many customers do I need?

 Compare
to market size (what %)
 Compare to market share (what %)
Is my pricing right?
 Are my costs too high?

NBC1 2008, (c) 2008 Jay A. Smith
7
Variable & Fixed Costs

Variable Costs:
 Increases
directly with each product sold (unit
volume)
 Materials, parts, (assembly), commission, shipping

Fixed Costs
 Does
not change with volume (# of units) produced
 Management salaries, rent, R&D, buildings,
equipment, marketing

Breakeven
#
units sold x contribution per unit = fixed costs
 After breakeven, contribution becomes profit
NBC1 2008, (c) 2008 Jay A. Smith
8
Contribution = Revenue – Variable Costs
Price to customer
Price to Channel
Variable
Cost Cost
NBC1 2008, (c) 2008 Jay A. Smith
9
Breakeven Examples
Unit Price
Cost of Sales
Materials
Manufacturing
Packaging
Commissions
Shipping
Total Cost of Sales
Contribution
Software
Software
Computer
Computer
$400
$200
$400
$500
$1
$10
$20
$20
$10
$61
15%
$1
$10
$20
$20
$10
$61
31%
$200
$100
$20
$10
$30
$360 90%
$200
$100
$20
$10
$30
$360 72%
$339
85%
$139
70%
$40 10%
$140 28%
Fixed Costs
Salaries
R&D
Rents
Marketing
Other
Total Fixed Costs
$1,000,000
$500,000
$100,000
$300,000
$100,000
$2,000,000
$1,000,000
$500,000
$100,000
$300,000
$100,000
$2,000,000
$1,000,000
$100,000
$100,000
$300,000
$100,000
$1,600,000
$1,000,000
$100,000
$100,000
$300,000
$100,000
$1,600,000
Total Fixed Costs
Contribution
Breakeven Units
$2,000,000
$339
5,900
$2,000,000
$139
14,388
$1,600,000
$40
40,000
$1,600,000
$140
11,429
NBC1 2008, (c) 2008 Jay A. Smith
10
Business Model
Product/Service
inputs
Customers
COMPANY
Money

How do we make our profit?
 We

sell _____ to ______
How do we provide/add value?
 How
do we help customers?
 Our _____ does ______ for customers?
NBC1 2008, (c) 2008 Jay A. Smith
11
What value do we provide to customers?

Toyota
Quality car, reliable, stylish, good mileage, easy finance
TCO of:
- Copy Machine:
- Computer:
- Ink-Jet Printer:
NBC1 2008, (c) 2008 Jay A. Smith
Total Cost of Ownership
(TCO)
12
Coca-Cola: Company Actions







Purchases Ingredients (caramel, sugar…)
Mixes them up in secret way
Adds water
Puts in cans and bottles – with distinctive marks
Ships them around the country/world
Puts them were they are purchasable/needed
Keeps them cold (or hot)
Value Chain
Inbound Logistics > Operations > Outbound Logistics > Marketing/Sales > Service
NBC1 2008, (c) 2008 Jay A. Smith
13
Coca-Cola: Customer Viewpoint
Drink in container
 Variety of drinks
 Convenience
 Refreshment
 Anything else?

NBC1 2008, (c) 2008 Jay A. Smith
14
Park 24
Business Model Adds Value in 2 Ways
NBC1 2008, (c) 2008 Jay A. Smith
15
Dual Opportunity – Value 2 Ways


Model: Rent land + charge for convenient parking
Primary Opportunity – Parking Demand

Convenient parking





Secondary Opportunity – Space Supply



74 million vehicles in Japan
11 million rental spaces needed
Only 5 million rental spaces available
6 million space gap
End of real estate bubble
More properties reasonably available
Strategy- Grow fast and preempt valuable spaces

Times only has 76,000 spaces so far
As of 2006
NBC1 2008, (c) 2008 Jay A. Smith
16
3rd Party Business Model
Product/Service
Customers
COMPANY
Money
Product/Service
User
COMPANY
Money
Other
Service
Sponsor
NBC1 2008, (c) 2008 Jay A. Smith
17
Value Chain Expertise
Inbound Logistics > Operations > Outbound Logistics > Marketing/Sales > Service
Toyota
Uniqlo
Amazon
McDonalds
Amex
What are we really good at?
NBC1 2008, (c) 2008 Jay A. Smith
18
Finding a good business model
Unfair advantage (Dentsu, Microsoft)
 Sustainability (hard to copy, preempt)
 Market failures

 poor
information (Yahoo Auction)
 old methods (Skype)
 incomplete/hard to use products (hybrid cars)

Think about what could/should be changed
NBC1 2008, (c) 2008 Jay A. Smith
19
Great Business Model Characteristics









Proprietary product (Microsoft Windows)
Branded/brand building (Google, Coca-Cola, Gucci)
Repurchase/“Razorblades” (Bic, HP Printers)
Habit forming (Philip Morris)
Scale-reinforcing (Yahoo Auction/eBay)
Pre-emptive (Yahoo Auction/eBay)
Unfair Advantage (Microsoft DOS, IE, Media Player)
High Switching Costs (MSWindows, Office, email)
Leverage Outsiders (Microsoft SEs, Publishers)
Goal: Sustainable Competitive Advantage
NBC1 2008, (c) 2008 Jay A. Smith
20
Business Model Characteristics
ANA
Proprietary
Coca-Cola
Microsoft
Google
Nintendo
O
O
O
O
Branded
O
O
O
O
O
Repurchase/
Consumable/
Razorblades
O
Service
O
Consumable
O
Upgrades
O
Reuse
O
“Razorblade”
game sales
Habit Forming
ANA Club
Caffeine ?
O Switch Cost
O
O
Scale
Re-enforcing
Route
Network
O
O
O
O
Sometimes
O
O
O
O
O
O
O
O
O
Preemptive
Leverage
Outsiders
O
Uses Unfair
Advantage
NBC1 2008, (c) 2008 Jay A. Smith
21
Prior Homework

Start thinking about a business idea to
develop during the rest of the course

Visit the websites of 2 companies that
interest you and/or related to a business
idea you are thinking about. Look at their
company information sections. What are
their revenue sources?
NBC1 2008, (c) 2008 Jay A. Smith
22
Business Models of Selected Companies

How does company make money?

What is key way(s) company adds value?
NBC1 2008, (c) 2008 Jay A. Smith
23
Revised Class Schedule
4/15(火)16:10-17:40
4/22(火)16:10-17:40
5/13(火)16:10-17:40
5/27(火)16:10-17:40
6/3 (火)16:10-17:40
6/10(火)16:10-17:40
6/17(火)16:10-19:20
6/24(火)16:10-17:40
7/1 (火)16:10-17:40
① Intro to Venture Business & Industry Analysis
② Intel Case Study
③ Sales & Marketing
④ Sales & Marketing Case Study
⑤ Marketing Project Presentations
⑥ Ideas and Innovation
⑦⑧Product & Service Presentations / Finance & Accounting
⑨ Finance & Accounting (continued)
⑩ Business Models & Plans
7/8 (火)16:10-19:20 ⑪⑫Elevator Pitches / Investment & Valuation
7/15(火)16:10-17:40 ⑬ Presentation Workshop & Review
7/22(火)16:10-19:20 ⑭⑮Presentations 2 Classes
Final Report: Team Business Plan Paper By July 29 (火）
Office Hour:
Ｔｕｅｓ： 13:30-15:00 VBL 2F 電話285-3630
NBC1 2008, (c) 2008 Jay A. Smith
[email protected]
24
Homework for Classes 11 & 12

Investors & Valuation

Elevator Pitch
NBC1 2008, (c) 2008 Jay A. Smith
25
Elevator Pitch

Think of an idea to fix a problem in the world or expand a new
opportunity













Energy, water, air, heat, pollution, forests, oceans, acid rain, noise
Humans, animals, plants, rocks
Housing, transportation, communication, information, knowledge
Government, corporations, communities, schools, associations, family
Entertainment, information, education, religion, arts, sports, beauty
War/weapons, hunger, homelessness, shelter, healthcare
Love, fear, vanity, lust, jealousy, hate, curiosity,
Whatever bothers you
Whatever you are really interested in
Money, jobs
Space, time
Life, wisdom, fun, happiness, joy
Make it your business
NBC1 2008, (c) 2008 Jay A. Smith
26
Today’s Global Challenges









Pollution
Hunger
Oil Shortage
Population Growth
Military Spending
Population Aging
Religious Fundamentalism
China Rising (supplier, consumer,
politics,military)
Other __________
NBC1 2008, (c) 2008 Jay A. Smith
27
Japan Issues










Economic Recession
Government Bureaucracy
Small land area/population
Oil Shortage
Population Aging
China Rising (supplier, consumer, politics,
military)
Broadband
Wireless
Humidity
Other __________
NBC1 2008, (c) 2008 Jay A. Smith
28
Finding an opportunity
Replace old way with new technology
 Incomplete/hard to use products

 (hybrid
(Skype)
cars)
Think about what could/should be changed
 Look at early adopters/adapters of products

 Find

a customer with a problem to be solved
Market failures/poor info (Yahoo Auction)
NBC1 2008, (c) 2008 Jay A. Smith
29
Landmine Detecting Plant

Aresa BioDetection



Denmark
www.aresa.dk
Genetically-modified plant
(thale) turns brown in
Autumn if there is a
landmine(地雷) or other
explosive underground
(NO )
100 million unexploded
landmines around the
world (BBC)
2

NBC1 2008, (c) 2008 Jay A. Smith
30
Individual Elevator Pitch 7/8 (火)
30-45 second “pitch” (every person)

Pitch Content (ENGLISH):
 Opportunity/problem
being solved
 Target market/customer
 Product/service to be created


Value being created
Why it is better than competition
 Business
model (how firm will make money)
 Anything else unique that will capture attention/interest

Pitch Goal: Get enough interest for a meeting
 Choose
the most interesting parts
 Business idea to use for rest of the class
NBC1 2008, (c) 2008 Jay A. Smith
31
Start Pitching
30 sec (soft stop)
 45 sec (hard stop)
 1 summary sentence – “hook”

 Who
/ produces What / for Whom
 Company/ Product / Customer Market
No PC or powerpoint
 2 questions from class/instructor

NBC1 2008, (c) 2008 Jay A. Smith
32
1 Sentence “Hook” - Catch Phrase



Most interesting part
Captures listeners attention, interest
Has some value/connection for listener (investor)
Examples:
 We combine LCDs & Solar panels to provide light
for millions of people in the dark
 We make cars for blind people.
 We use nanotechnology to double fuel efficiency
 We work on the other big “silicon” application
NBC1 2008, (c) 2008 Jay A. Smith
33
A Generic Pitch
[company name] provides [product/solution] to [target
customer segment] enabling them to [key benefits].
Our product has the key advantage of [advantage]
The business is led by [key people] who have [these
appropriate backgrounds].
We start(ed) business [when] and plan to deliver our first
products [month/year].
Our revenue is based on [revenue streams]
We expect to become profitable in [year].
We have raised over [amount] from [key investors, types]
NBC1 2008, (c) 2008 Jay A. Smith
34
A Sample Generic Pitch
1) [WonderCar] provides [automobiles] to [blind car owners] enabling
them to [more comfortably and safely enjoy their driving experience].
2) Our product has the key advantage of [being custom tailored to blind
car owners]
3) The business is led by [Steve and Dave Wonder] who have
[backgrounds in business development, industrial design and
human factors for the visually impared].
4) We start(ed) business [this past January] and plan to deliver our first
products [in the fall of next year].
5) Our revenue is based on [sales to automakers, customizing houses
and end users]
6) We expect to become profitable in [2007].
7) We have raised over [$2.4 million] from [friends, family, Walden
Ventures, the Ray Charles Foundation, and the U.S. Department of
Transportation.]
NBC1 2008, (c) 2008 Jay A. Smith
35
Example Landmine Plant Pitch
Aresa Biotech will provide genetic botanic solutions to governments
and non-profit agencies enabling them to more effectively and safely
deal with the problem of old weapons.
Our product has the key advantages of safety, cost, ease of use and
speed.
The business is led by a team who have backgrounds in genetic
engineering, government contracting, and U.S. Army.
We started business in 2004 and plan to deliver our first products after
tests are completed this year.
Our revenue is based on government and NPO contracts
We expect to become profitable in 2006.
We have raised over $250,000 from NPO foundations and government
organizations
NBC1 2008, (c) 2008 Jay A. Smith
36
Suggested Readings

Books








チップに組み込め!―マイクロエレクトロニクス革命をもたらした男たち byT.R. リード
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「ネットワーク経済」の法則―アトム型産業からビット型産業へ…変革期を生き抜く72の指針 by
カール シャピロ &ハル・R. ヴァリアン
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民芸 柳祖悦 Ｓｏｅｔｓｕ Yanagi
対訳 ブレイク詩集―イギリス詩人選〈4〉 岩波文庫 ウィリアム ブレイク
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NBC1 2008, (c) 2008 Jay A. Smith
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