ENT102-Venture Ideation

09/04/2021 Laureate International Universities https://laureate-au.blackboard.com/webapps/blackboard/content/listContent.jsp?course_id=_100496_1&content_id=_9621155_1&mode=reset 1/8 MODULE 4 .2M ODULE 4 .2 T h e 7 P s In tro du ctio n : In m od u le s 2 t o 4 .1 , y o u h ave co ndu ct ed r e se arch in to t h e m arke t pote n tia l f o r y o u r id ea. I n m od u le 4 .2 , y o u w ill r e � ect o n t h e ‘7 P s’ o f m arke t p osit io n in g, co nsid er y o u r id ea’s � n an ci al f e asib ilit y , b y e xp lo rin g �n an ci al f o re ca stin g, id en tif y w heth er y o u r id ea is like ly t o a ch ie ve e xte rn al in ve stm en t, a n d u lt im ate ly r e ach a d eci sio n o f G O w here y o u w ou ld co ntin ue w it h t h e id ea, o r N O -G O w here y o u w ou ld e it h er s to p n ow o r p iv o t y o u r id ea t o b e m ore f a vo u ra b le in a n oth er m arke t. Y o u w ill co ntin ue t o u pdate y o u r B usin ess M od el C an va s a n d jo u rn al, a n d pre p are a b u sin ess ca se f o r a sse ssm en t 2 . Th e 7 P s Th e 7 P s a re a s e t o f m arke tin g t a ct ic s . W hen y o u co mbin e t h e 7 t a ct ics , yo u ca n Pro d u ct Th e � rs t P is P ro d u ct .  T h ese a re t h e g o od s a n d/o r s e rv ice s y o u w ill p ro vid e. I t in cl udes t h e f e atu re s a n d b en e� ts t h at y o u r cu sto m ers n eed , plu s a n y a ct io n s a ro u nd t h ose s u ch a s r e p air s . A ls o – w hat w ill t h e pro d u ct d o f o r t h e cu sto m er a n d v a lu e w ill t h e cu sto m er d eriv e . P rice 09/04/2021 Laureate International Universities https://laureate-au.blackboard.com/webapps/blackboard/content/listContent.jsp?course_id=_100496_1&content_id=_9621155_1&mode=reset 2/8 Price in cl udes y o u r p rici ng s tr a te gy.  Y o u m ay h ave o n e p rice f o r cu sto m ers o n lin e a n d a n oth er f a ce -t o -f a ce , a p ply d is co unts f o r b u yin g in b u lk or s e aso n ally . R ese arch in g p rice u se s a m ix o f p rim ary a n d se co ndary r e se arch m eth od s, f o r e xa m ple d is co ve rin g t h e t r a d e p rice f r o m t h e m an ufa ct ure r o n lin e, a n d t h en v is it in g s to re s t o d is co ve r t h e ra n ge o f p rice s s e t b y e ach . H ere y o u a ls o n eed t o u nders ta n d t h e ke y ch an nels a n d t h e co mmis sio n s y o u m ay n eed t o p ay t h em f o r s e llin g a n d dis tr ib u tin g y o u r p ro d u ct s. P ro m otio n Pro m otio n al a ct iv it ie s a re t h e w ay y o u t e ll cu sto m ers a b ou t y o u r pro d u ct s a n d s e rv ice s.  R ese arch a ssis ts t o id en tif y w here cu sto m ers g o a n d m eet m ayb e o n s o ci al m ed ia o r f a ce -t o -f a ce . I t a ls o in cl udes s a le s ta ct ics t h at y o u m ay w is h t o in co rp ora te . P la ce P la ce is w here y o u w ill m an ufa ct ure a n d s e ll.   I t m ay in cl ude o n lin e sto re s, m arke ts , o r o th er p h ysica l v e n ues. B usin ess lo ca tio n f o rm s p art o f th e C han nels b lo ck on t h e B usin ess M od el C an va s, a n d n eed s t o b e m ad e co nve n ie n t f o r t h e cu sto m er t o g e t t o y o u t o b u y f r o m y o u . Peo p le P eo p le r e fe rs t o t h e p eo p le w ho w ork fo r y o u in s a le s a n d cu sto m er se rv ice .  H avin g t h e r ig h t p eo p le a ttr a ct s a n d ke ep s t h e cu sto m ers . P ro ce ss P ro ce ss in cl udes y o u r p olicy , p ro ce du re s a n d s ta n dard s t h at w ill h elp m ake y o u p ro d u ct in to a g o od q u alit y p ro d u ct . Ph ysica l E vid en ce Th is r e fe rs t o a n yth in g t h at is o u tfa cin g t o t h e cu sto m ers .  Y o u r p re m is e s, y o u r b ra n d a n d p acka gin g a re a ll p art o f y o u r p h ysica l e vid en ce . Fin an ci al f e asib ilit y 09/04/2021 Laureate International Universities https://laureate-au.blackboard.com/webapps/blackboard/content/listContent.jsp?course_id=_100496_1&content_id=_9621155_1&mode=reset 3/8 Fin an ci al f e asib ilit y a n aly sis is t h e p ro ce ss o f le arn in g w heth er a n d h ow a v e n tu re w ill m ake a p ro �t. I t h elp s a n e n tr e p re n eu r t o t e ll t h e s to ry o f t h e ve n tu re — what ca pit a l is n eed ed t o s ta rt a n d t o o p era te t h e v e n tu re a n d h ow lo n g it w ill t a ke t o g e n era te a p ro �t a s w ell a s t h e r e so u rce s r e q u ir e d to b re ak eve n . Th e b est w ay t o a n aly se � n an ci al f e asib ilit y is w it h r e al r e ve n ue a n d exp en se d ata . H ow eve r, m ost n ew v e n tu re s d o n ot h ave a n o p era tin g h is to ry o r e n ou gh h is to rica l � n an ci al d ata t o cr eate a f o re ca st o f t h e ve n tu re ’s p ro �ta b ilit y . S o t h is p ro ce ss m ay r e q u ir e y o u t o m ake r e ve n ue an d e xp en se e stim ate s t h at a re b ase d o n t h e p erfo rm an ce o f co mpetit iv e co mpan ie s, in du str y a ve ra ge s, o r y o u r o w n a ssu m ptio n s a b ou t t h e pro je ct ed r e ve n ue a n d co sts o f y o u r e n tr e p re n eu ria l v e n tu re . T h ese a ssu m ptio n s n eed t o b e b acke d b y c re d ib le r e so u rce s; o th erw is e , y o u co uld lo se cr ed ib ilit y a m on gst in ve sto rs f o r e xa m ple . Sta rtin g w it h r e se arch in g a n d ca lcu la tin g t h e b u sin ess s ta rtu p co sts is u se fu l b u t d oes n ot p ro je ct in to t h e f u tu re , a n d t h ere fo re n ot a g o od in dica to r o f b u sin ess s u cce ss. T e m pla te s f o r ca lcul atin g s ta rtu p co sts a re a va ila b le f r o m http s:/ /w ww.b u sin ess.g o v.a u /P la n nin g/B usin ess- p la n s/W rit in g-a -B usin ess-P la n /S ta rt-u p-co stin g-o f-y o u r-b u sin ess A m uch b ette r w ay o f lo oki ng a t f e asib ilit y is t o p re p are a � n an ci al fo re ca st a n d t h is in cl udes t h re e ke y co mpon en ts : E xp en se s In co me o r r e ve n ue B re ak-e ve n Exp en se f o re ca stin g Exp en se f o re ca stin g is t h e p ro ce ss o f m aki ng � n an ci al a ssu m ptio n s o n th e co sts a sso ci ate d w it h s ta rtin g a n d o p era tin g y o u r v e n tu re . I t is h elp fu l to lo ok at y o u r p ro je ct ed e xp en se s o ve r a s e t p erio d , o ft e n 1 -3 y e ars . E xa m ple s o f co mmon e xp en se s in cl ude t h e f o llo w in g: C ost o f G ood s S o ld ( C O GS) R aw m ate ria ls 09/04/2021 Laureate International Universities https://laureate-au.blackboard.com/webapps/blackboard/content/listContent.jsp?course_id=_100496_1&content_id=_9621155_1&mode=reset 4/8 Dir e ct la b ou r a n d in -d ir e ct la b ou r s u ch a s co ntr a ct ors O ve rh ead s u ch a s r e n t a n d u tilit ie s Se llin g A dve rtis in g & M arke tin g Sa le s a n d d is tr ib u to r C om mis sio n R eta il s to re o p era tio n s & o n lin e w eb sit e s G en era l a n d a d m in is tr a tiv e E xe cu tiv e a n d o � ce p ers o n nel s a la rie s a n d b en e� ts O � ce s u pplie s Eq u ip m en t Pro fe ssio n al s e rv ice s s u ch a s le ga l a n d a cco untin g To f o re ca st e xp en se s f o r y o u r in co me s ta te m en t, y o u w ill n eed in fo rm atio n a b ou t t h e co sts t o co ndu ct t h e o ve ra ll b u sin ess, in cl udin g t h e in it ia l s ta rt-u p in ve stm en t a n d t h e o n go in g co sts a sso ci ate d w it h o p era tin g y o u r v e n tu re . A s y o u e stim ate e xp en se s f o r y o u r p ro -f o rm a in co me s ta te m en t, y o u w ill like ly m ake m an y a ssu m ptio n s, s u ch a s t h e pro je ct ed co st o f r a w m ate ria ls , e xp en se s a sso ci ate d w it h r e n tin g a n d re n ova tin g s p ace , a n d t h e co st o f h ir in g e m plo ye es. Y o u ca n g e t s o m e act ual d ata b y ca llin g s u pplie rs , lo oki ng a t t h e a ve ra ge r e n t p er s q u are m etr e , o r m aki ng a ssu m ptio n s a b ou t la b ou r co sts b ase d o n t h e m in im um w age . W hen t h ey a re a va ila b le , y o u ca n a ls o u se co mpetit iv e d ata t o h elp e stim ate y o u r p ro je ct ed e xp en se s. F o r e xa m ple , if o n a ve ra ge , co mpetit o rs in y o u r in du str y s p en d 3 0% o f r e ve n ue o n t h e co st o f t h e ra w m ate ria ls a n d 1 5% o f r e ve n ue o n m arke tin g, t h en y o u m ig h t a ssu m e th at y o u r e xp en se s w ill b e co mpara b le . Y o u ca n t h en u se t h ese in du str y a ve ra ge s t o d ete rm in e y o u r p ro je ct ed co st o f r a w m ate ria ls a n d m arke tin g e xp en se s b y m ult ip ly in g t h ese p erce nta ge s b y y o u r p ro je ct ed re ve n ue. O f co urs e , t h e d an ge r w it h t h is lo gic is t h at y o u r o w n e xp en se s m ay v a ry s ig n i� ca ntly f r o m t h e in du str y a ve ra ge f o r a n y n um ber o f re aso n s. T h ere fo re , if y o u u se t h is m eth od , y o u w ill w an t t o a cco unt f o r an y s ig n i� ca nt d i� ere n ce s b etw een y o u r v e n tu re a n d co mpetit iv e o � erin gs. 09/04/2021 Laureate International Universities https://laureate-au.blackboard.com/webapps/blackboard/content/listContent.jsp?course_id=_100496_1&content_id=_9621155_1&mode=reset 5/8 Reve n ue f o re ca stin g Like e xp en se f o re ca stin g, r e ve n ue f o re ca stin g is a n im porta n t p art o f an aly sin g � n an ci al f e asib ilit y a n d p re d ict in g w hen y o u r v e n tu re w ill s ta rt to m ake a p ro �t. R eve n ue = s a le s p ric e p er u nit × t o ta l n um ber o f u nit s s o ld T h is f o rm ula w orks f o r b oth g o od s a n d s e rv ice s.  F o r e xa m ple , I m ay h ave th re e p ro d u ct s: S m all � sh in g r o d s t h at I d eci de t o s e ll a t $ 62 e ach M ed iu m s iz e d r o d s t h at I d eci de t o s e ll a t $ 125 e ach La rg e r o d s t h at I d eci de t o s e ll a t $ 25 4 e ach A s a s e rv ice b u sin ess m ay h ave a n oth er w ay t o m easu re t h e ‘u nit s ’ b ein g so ld : 30 m in ute m assa ge I d eci de t o s e ll a t $ 45 6 0 m in ute s I d eci de t o s e ll a t $ 78 90 m in ute s I d eci de t o s e ll a t $ 112 I ca n f o re ca st h ow m an y o f e ach it e m I m ig h t s e ll e ach m on th . To f o re ca st r e ve n ue f o r y o u r in co me s ta te m en t, y o u w ill n eed t o m ake assu m ptio n s a b ou t t h e s o u rce a n d t im in g o f r e ve n ues. S ta rt b y p ro je ct in g th e d em an d o r n um ber o f u nit s y o u a n tici pate s e llin g o ve r t h e n ext 1 -3 y e ars . C re atin g a d em an d f o re ca st, e sp eci ally in a n ew in du str y o r m arke t se gm en t, ca n b e a ch alle n ge . A s y o u f o re ca st d em an d, b e s u re t o t a ke in to a cco unt r e aso n ab le e xp ect atio n s o f h ow d em an d w ill ch an ge o ve r tim e. S a le s o ft e n d o n ot in cr ease in a lin ear f a sh io n ; t h ey ca n s lo w d ow n or s p eed u p o w in g t o m an y d i� ere n t f a ct ors s u ch a s ch an ge s in co nsu m er p u rch asin g h ab it s , in �u en ce o f e co nom ic fo rce s b oth lo ca lly a n d in te rn atio n ally s u ch a s in te re st r a te s a n d t h e � u ct uatio n o f t h e $ , 09/04/2021 Laureate International Universities https://laureate-au.blackboard.com/webapps/blackboard/content/listContent.jsp?course_id=_100496_1&content_id=_9621155_1&mode=reset 6/8 am ou nt o f m on ey in ve ste d in m arke tin g, o r n ew co mpetit iv e p ro d u ct s th at e n te r t h e m arke t. A noth er im porta n t e le m en t o f r e ve n ue f o re ca stin g is t h e p rice a t w hich y o u w ill s e ll y o u r p ro d u ct o r s e rv ice . T h ere a re m an y d i� ere n t p rici ng str a te gie s t o ch oose f r o m . T h e o n e t h at w orks b est f o r y o u r v e n tu re m ay b e d ete rm in ed b y t h e t y p e o f p ro d u ct o r s e rv ice , t h e in du str y , t h e beh avio u r o f y o u r cu sto m ers , o r o th er f a ct ors s u ch a s co mpetit o rs . K now le d ge o f t h e m arke t w ill h elp y o u t o ch oose t h e b est p rici ng s tr a te gy fo r r e ach in g y o u r � n an ci al g o als . W ill t h e id ea a ch ie ve in ve stm en t? M an y s ta rtin g b u sin esse s s u pport t h em se lv e s � n an ci ally a ls o ca lle d ‘B oots tr a p pin g’.   T h e m on ey m ay co me f r o m t h e f o u nder, f a m ily a n d fr ie n ds.  D ep en din g o n t h e t y p e o f b u sin ess, t h is m ay b e e n ou gh t o g e t sta rte d in a le an w ay a n d t h en u se t h e p ro �ts g e n era te d in t h e co mpan y to g ro w .  H ow eve r, n ot a ll b u sin esse s ca n s ta rt o r g ro w t h is w ay.  I n ve sto rs m ay b e n eed ed t o s u pport e it h er s ta ge .  I n ve sto rs r e q u ir e cl ear e vid en ce t h at t h e b u sin ess is like ly t o n ot o n ly b e p ro �ta b le , b u t t h at p ro �t h as a h ig h p ote n tia l f o r g ro w th .  T h e co mbin atio n o f p rim ary a n d se co ndary r e se arch p lu s a � n an ci al f o re ca st t h at is b ase d o n r e se arch is a s tr o n g s to ry t o t e ll a n in ve sto r a t a b u sin ess p it ch .  B usin ess p it ch es w ill b e co ve re d in m od u le 5 . B re ak eve n Th e � n an ci al f o re ca stin g in cl udes � n din g t h e ‘B re ak eve n ’ � gu re .  Y o u co uld m ake s u bsta n tia l r e ve n ue f r o m y o u r b u sin ess, b u t s till m ake a lo ss in t h e b u sin ess.  T h ere fo re , a f o re ca stin g s p re ad sh eet o ft e n in cl udes a b re ak-e ve n ca lcu la tio n . A s im ple ca lc u la tio n in cl udes: G ro ss p ro �t = s a le s r e ve n ue - co sts o f g o od s s o ld C alcu la tin g y o u r � xe d co sts . T h ese a re e xp en se s t h at d on ’t ch an ge w heth er o r n ot y o u s e ll a n yth in g. T h e m on th ly le ase is a n e xa m ple o f a � xe d co st. E xa m ple : M y T -S h ir t b u sin ess r u ns o u t o f m y ga ra ge . I d on ’t h ave m an y � xe d e xp en se s a n d t h ey t o ta l $ 10,0 00 an nually . 09/04/2021 Laureate International Universities https://laureate-au.blackboard.com/webapps/blackboard/content/listContent.jsp?course_id=_100496_1&content_id=_9621155_1&mode=reset 7/8 Reve n ue y o u b ro u gh t is m in us t h e co st o f t h e v a ria b le e xp en se s. T h e co st o f t h e g o od s y o u h ad t o b u y t o p ro vid e t h e p ro d u ct s o r se rv ice s a re t h e v a ria b le e xp en se s.  I f y o u b ou gh t a t -s h ir t f r o m t h e w hole sa le r a n d t h en s o ld it a t a p rice y o u s e t f o r it , t h e t -s h ir t w ou ld b e a n e xa m ple o f a v a ria b le e xp en se .  T h e n um ber o f t - s h ir ts y o u b u y m ay v a ry . S u btr a ct t h e co st o f t h e g o od s y o u s o ld ( t h e co st o f t h e t -s h ir t y o u p aid t h e w hole sa le r is t h e C O GS i. e . C ost o f G ood s S o ld ) f r o m t h e a m ou nt y o u s o ld it f o r a n d y o u h ave y o u r gro ss p ro �t. S o ld T -S h ir t t o m y cu sto m er f o r $ 50 P aid $ 25 t o t h e w hole sa le r f o r t h e T -S h ir t $ 50-$ 25 = $ 25 ( G ro ss P ro �t) G ro ss p ro �t m arg in = ( g ro ss p ro �t ÷ s a le s r e ve n ue) x 1 00 $ 25 is 5 0% o f $ 50 s o y o u r G ro ss P ro �t M arg in is 5 0% B re ak-e ve n p oin t = � xe d co sts ÷ g ro ss p ro �t m arg in M y � xe d co sts a re $ 10,0 00 M y G ro ss P ro �t M arg in is 5 0% M y B re ak-e ve n is $ 20,0 00 If I d on ’t s e ll $ 20,0 00 w orth o f T -S h ir ts I w ill m ake a lo ss. G O /N O -G O In du str y p od ca st: G o/N o-G o d ecis io n -m aki ng. In t h is p od ca st, J o h n B urke tt, A dvis o ry B oard C hair m an , En tr e p re n eu r, B usin ess S tr a te gis t, A nge l I n ve sto r, C orp ora te M en to r a n d f a ci lit a to r, s h are s h is e xp erie n ce w it h u s in r e ga rd s t o G o/N o-G o d eci sio n -m aki ng in t h e e n tr e p re n eu ria l p ro ce ss. H e re � ect s o n h is e xp erie n ce m aki ng G o a n d N o-G o d eci sio n s f o r h is b u sin ess id eas. H e a ls o p ro vid es s o m e v a lu ab le in sig h ts a n d a d vice f o r y o u ng e n tr e p re n eu rs f a ci ng t h is d eci sio n -m aki ng m om en t in 09/04/2021 Laureate International Universities https://laureate-au.blackboard.com/webapps/blackboard/content/listContent.jsp?course_id=_100496_1&content_id=_9621155_1&mode=reset 8/8 th eir v e n tu re id eatio n p ro ce ss. W hat ca n y o u t a ke a w ay f r o m h is r e m arks t h at w ou ld b en e� t y o u r e n tr e p re n eu rs h ip jo u rn ey? B efo re t a ki ng a n id ea t o t h e n ext p h ase , t h ere n eed s t o b e a p oin t w here th e r e se arch a n d f o re ca stin g in dica te it h as a h ig h like lih ood f o r s u cce ss o r n ot.  T h is is t h e G O /N O -G O m om en t.  T h e e n tr e p re n eu r h as t h re e ch oice s: G O w hich m ean s p u t a ll e � ort in to s ta rtin g a n d g ro w in g t h e b u sin ess.  I t m ay m ean � n din g a n in ve sto r, s e cu rin g a m an ufa ct urin g p artn er, lo ca tin g pre m is e s t o le ase , d eve lo p in g a ll m arke tin g a sse ts a n d s ta rtin g a ca mpaig n . N O -G O a n d s to p t h e id ea f r o m p ro gre ssin g a n y f u rth er. N O -G O b u t p iv o tin g t h e id ea p lu s cu sto m er s e gm en t a n d p ers o n as t o m ake it v ia b le . I f t h is a p pro ach is t a ke n, t h e s a m e m eth od is u se d a ft e r th e f e asib ilit y a n aly sis is d on e a n d a n oth er G O /N O -G O p oin t is r e ach ed . Th e m arke t r e se arch t h at y o u co ndu ct ed in t h e la st m od u le w ill h elp t o m ake t h is v a lu ab le d eci sio n a s t h e cu sto m ers w ill p ro vid e in sig h ts in to th e v ia b ilit y o f t h e p ro d u ct .