key management concepts for new businesses carmela aquino, kelly ling, tom haywood ucb new business...
TRANSCRIPT
Key Management Concepts for New Businesses
Carmela Aquino, Kelly Ling, Tom HaywoodUCB New Business Practicum
Agenda
● Introductions (7:10-7:15)● Business Model Canvas (7:15-7:30)● Financial Management Basics (7:30-7:45)● Marketing Fundamentals (7:45-8:00)● Mastering Your Pitch (8:00-8:15)● Q&A (8:15-8:30)
Introductions: Who are you? Why are you here today?*
* There is no confidentiality guaranteed in the open forum.
Who We Are: UC Berkeley Haas
● Focus on instillingentrepreneurialmindset amongstudents
● Team-focusedlearning environment
● Emphasis on defining principles
● Question the Status Quo: In order to provide true value, really understand the pain point you are addressing for the customer you are serving, and think: how might we… ?
● Student Always: Have a growth mindset! Some of the most successful businesses were ones that were not afraid to iterate on their business model and pivot when necessary
● Confidence Without Attitude: In order to grow, constantly seek feedback, stay humble, and keep doing better work
● Beyond Yourself: When you’ve made it, pay it forward!
Things We’re Learning
Business Model Canvas
How to Use the Business Model Canvas
The Business Model Canvas is a useful tool for assessing your business. It is encouraged to get you to think deeply about the questions that underpin the unique value of your business.
Exercise: Sketch out the canvas for your business today - feel free to ask questions along the way
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Which one of our customer’s problems are we helping to
solve?
Which customer
needs are we satisfying?
For whom are we creating
value?
Who are our most
important customers?Through which
Channels do our Customer Segments want to be reached?
What type of relationship does each
of our Customer Segments expect us
to establish?
What Key Activities do our Value Propositions
require?
What Key Resources do our Value Propositions
require?
Who are our Key Partners?
Who are our key
suppliers?
For what value are our customers really willing to pay? How do we make money?
What are the most important costs inherent in our business model?
Financial Management Basics
Time Value of Money
¨What would you prefer? $100,000 today? Or $250,000 in seventeen years?
*Assuming an interest rate, r = 5%
How do we find r?
● Sometimes it is given, such as interest rate for bank accounts
● Sometimes it is unknown, so we need to make assumptions
Key Takeaways
● A “cashflow” is a time-dated money amount
● You can only compare cashflows at the same point in time
● In order to compare, we need to convert the future cash flows into present values
● The higher the risk, the higher the discount rate
Accounting 101
Balance Sheet Income Statement Statement of Cashflows
Golden formula:Assets= Liabilities + Equity
1.What is sold in the period
Minus(-)
2. What it costs to make
Minus(-)
3. Selling & general expenses for the period
Equals(=)
Assets: What you “have” today (ex/ cash, receivables, inventory, fixed assets)
Liabilities: What you “owe” today (ex/ debt)
Equity: What you’re “worth” today (ex/ capital stock)
Income for the period
1. Cash at start of period
Plus(+)
2. Cash received in period
Minus(-)
3. Cash spent during period
Equals(=)
Cash on hand at end of period
Unit Economics
Unit Economics Customer Acquisition Cost Customer Lifetime Value
Unit Economics = Revenue per Unit - Cost per Unit
Unit economics - the direct revenues and costs associated per unit for your business model
If LTV > CAC, you have a sustainable business model
Customer Lifetime Value (LTV) - the total revenue a single user generates over the course of his or her use of your service
LTV = Churn Rate * Gross Margin
Unless B2B, you want a shorter CAC payback period (6-18 mos)
Customer Acquisition Cost (CAC) - the cost to acquire a single customer - typically through sales and marketing
Customer Payback Period - the time in months to fully pay back the CAC
Customer Payback Period = CAC / Gross Margin
● Of the firms that required start-up capital, 3 in 10 launched their business with less than $5,000
● Only 1.5% of the firms needing start-up capital required $1M or more to start their businesses
Funding Your Business
2007 U.S. Census Survey of Business Owners
Source: U.S. Census Bureau
Other Sources of Funding
● Own Money● Friends and Family● Angels● Incubators● VCs● Banks● Grants● Vendor Financing● Corporations
AssumptionsCompany A
● Profits in 5 years: $2.5M
● Multiple (Comparable): 15x profits
Investor
● Investment: $2.0M
● Expected Return: 50% (Annual)
● Time to Liquidity: 5 years
Valuation for Startups (An Example)
● It doesn’t matter what recordkeeping software you use or if you choose to use Excel - just make sure you have a system in place
● Get used to thinking about money in the present value - remember that you can’t simply compare the numerical value of future earnings with money now
● Figure out your unit economics to understand if you are in a sustainable business
The Bottom Line
Exercise: Think about the components that should go into a calculation of your Customer Acquisition Cost (CAC) and Customer Lifetime Value (LTV)
Financial ResourcesAccounting for Startupshttps://www.waveapps.com/startup-resources/http://www.quora.com/What-accounting-software-do-startups-utilize-Which-programs-are-best-suited-for-start-upshttp://venturebeat.com/2014/01/27/the-best-back-office-software-for-small-businesses/
Unit Economicshttp://www.bvp.com/blog/bessemer-cloud-computing-law-6-build-revenue-enginehttp://kellblog.com/2014/07/30/the-ultimate-saas-metric-ltv-cac/
Valuation and Venture Financehttp://fundersandfounders.com/how-startup-valuation-works/https://www.coursera.org/course/venturefinancehttp://www.persistentchange.com/leverage-startup/nondilutive-financing-leverage-startup-part-1/
Marketing Fundamentals
Marketing Strategy
● Acquisition - Getting someone to come to your site or become aware of your brand (ie. social media)
● Activation - Starting a relationship with a visitor or a prospect by getting some commitment (ie. getting a sign-up for a free trial)
● Retention - Seeing a customer try your product multiple times and become an active user
● Referral - Encouraging your active users to refer new prospects to your business (ie. through monetary and non-monetary incentives)
● Revenue - Gaining revenue from an action that your customer takes (ie. upgrading from a free to a paid subscription)
Startup Metrics for Pirates: AARRR!*
* Coined by Dave McClure (500 Startups)
Source: http://www.slideshare.net/dmc500hats/startup-metrics-for-pirates-long-version
Activation1. Get your prospects to engage
with you:● Experiment with your
outward-facing content to encourage clicks, downloads, etc.
1. Turn prospects into leads:● Classify as leads based on
behaviors that show commitment (ie. downloading a whitepaper)
Acquisition1. Find the marketing channels
that can deliver for you:● Largest volume (#)● Lowest-cost ($)● Best-performing (%) in
terms of conversion for you2. Capture your prospects
● Use a Customer Relationship Management system
Acquisition & Activation
Referral1. After a positive experience,
encourage your customers to refer you● Make the ask explicit● Offer incentives for referral
(ie. usage bonuses)
Retention1. Continue engaging with your
leads to encourage use● Regular content (blog)● Automated e-mails
(lifecycle, event-based)1. Encourage repeat use from
customers● Offer relevant content● Provide incentives for repeat
use (ie. tiered pricing)
Retention & Referral
Customer Relationship Management
● Where are you seeing a drop-off in your customers?● Having a customer relationship management system in
place allows you to identify leaks in your funnelo Salesforce - most fully-featuredo Insightly - deep integration with Google, Microsofto Nimble - has social media integration featureso ZohoCRM - integrates with Zoho system, cloud-basedo Batchbooko ContactMe
● Use the Business Model Canvas to think about your company’s mission and overall strategy - this will inform your marketing strategy
● Understand your customer acquisition funnel using the AARRR framework - identify your problem areas in this funnel
● Track your encounters with prospects, leads, and customers through a customer relationship management system
The Bottom Line
Exercise: Think about how the Customer Acquisition Funnel looks like for your business. Where do you think you see the greatest need for improvement?
Mastering Your Pitch
Storytelling
The 10/20/30 Rule of PowerPoint
Slides
1. Problem2. Your solution3. Business model4. Underlying magic/technology5. Marketing and sales6. Competition7. Team8. Projections and milestones9. Status and timeline10.Summary and call to action Read More:
http://blog.guykawasaki.com/2005/12/the_102030_rule.html#ixzz3HNWfQESL
10 20
30
Minutes
Size Font
General Rule of Thumb for investor or competition pitches- even if more time slotted, leaves room of Q&A and discussion
General Rule of Thumb for investor or competition pitches- even if more time slotted, leaves room of Q&A and discussion
Good Reads
1. Lean Startup - Eric Reise2. Innovator's Dilemma -
Clayton Christensen3. The Startup of You - Reid
Hoffman and Ben Casnocha4. Art of the Start - Guy
Kawasaki
Example Pitch Decks
● Airbnb● PinMyPet● http://bestpitchdecks.com/● http://www.pitchenvy.com/
Resources
Exercise: Think about your existing pitch - how do you think you can improve it?
Questions?
