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ENTREPRENEURSHIP

Business Model and Plan

Prof. David Gomulya, PhD

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Course roadmap
Lessons 2 and 3
Lesson1 Lessons 4 and 5
Entrepreneurial
Entrepreneurial Spirit, Entrepreneurial Strategy
Opportunity
Mind, and Actions Business Models
Pitch

Lesson 11 Lessons 9 and 10

Lesson 6
Growth, Harvest, and Marketing
Team Consultation
Exit Finance

Lesson 12 & 13 Lesson 7

Field Interview (No class)

Team Presentations Lesson 8: Recess

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Business model

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Business Model Canvas

 A business model describes the rationale of how
an organization creates, delivers, and captures
value (economic, social, cultural, or other forms of
value).
 The process of business model construction is part
of business strategy.
 Business models are used to describe and classify
businesses (especially in an entrepreneurial
setting), but they are also used by managers inside
companies to explore possibilities for future
development.

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Examples
 Bricks and clicks business model
 Business model by which a company integrates
both offline (bricks) and online (clicks) presences.
 A chain of stores allows the user to order products online,
but lets them pick up their order at a local store.
 Cutting out the middleman model
 The removal of intermediaries in a supply chain: "cutting
out the middleman".
 Instead of going through traditional distribution channels,
which had some type of intermediate (such as
a distributor, wholesaler, broker, or agent), companies may
now deal with every customer directly, for example via the
Internet.
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Examples
 Direct sales model
 Direct selling is marketing and selling products to
consumers directly, away from a fixed retail location.
 Sales are typically made through party plan, one-to-one
demonstrations, and other personal contact arrangements.
 A text book definition is: "The direct personal presentation,
demonstration, and sale of products and services to
consumers, usually in their homes or at their jobs.“
 Premium business model
 High end products and services.
 Brand image is important, as quality can be subjective.
 “Branded” stuff, e.g. Rolex, Bentley

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Examples
 Franchise
 Franchising is the practice of using another firm's
successful business model.
 For the franchisor, the franchise is an alternative to
building 'chain stores' to distribute goods and avoid
investment and liability over a chain.
 The franchisor's success is the success of the franchisees.
The franchisee is said to have a greater incentive than a
direct employee because he or she has a direct stake in
the business.
 Freemium business model
 Business model that works by offering basic Web services,
or a basic downloadable digital product, for free, while
charging a premium for advanced or special features.
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Business model canvas

https://web.archive.org/save/https://isaacjeffries.com/blog/201
8/9/8/how-to-fill-in-a-business-model-canvas

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Business model canvas

Value proposition
 What value do we deliver to the customer?
 Which one of our customer’s problems are we helping to
solve?
 What bundles of products and services are we offering to
each Customer Segment?
 Which customer needs are we satisfying?

Customer segments
 For whom are we creating value?
 Who are the most important customers?

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Business model canvas

Customer relationships
 How to establish and maintain relationships with customers?
 Which ones have we established?
 How are they integrated with the rest of our business model?
 How costly it is to maintain relationship with them?

Channels
 Through which channel do we reach our customer segments?
 How are we reaching them now?
 How are our channels integrated?
 Which ones work best?
 Which ones are most cost-efficient?

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Business model canvas

Key partners
 Who are our key partners?
 Who are our key suppliers?
 Which Key Resources are we acquiring from partners?
 Which Key Activities do partners perform?

Key activities
 What key activities do our Value Proposition require?
 Our distribution channels?
 Customer relationships?
 Revenue stream?

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Business model canvas

Key resources
 What key resources do our Value Proposition require?
 Our distribution channels?
 Customer relationships?
 Revenue stream?

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Business model canvas

Revenue streams
 For what value are our customers really willing to pay?
 For what do they currently pay?
 How are they currently paying?
 How would they prefer to pay?
 How much does each Revenue Stream contribute to overall
revenues?

Cost structure
 What are the most important costs inherent in our business
model?
 Which Key Resources are most expensive?
 Which Key Activities are most expensive?
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Feasibility Plan

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Objective
 Force your team to think together
 Definitely not cast in stone
 When given to investors, it is to get a
second look or even a call
 Not to get money. Nobody gives money
just from reading a business plan. They
must meet you first.

Some of the contents come from Guy Kawasaki, 2004. “The art of the start”. Portfolio: USA and The Bird-in-hand principle: Who I am, what I
[1]

know, and whom I know. Darden note #UVA-ENT 0090.

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Tips
 Do not bore readers.
 Put interesting first earlier.
 Select one person to write or at least final edit.
 Staple it. Do not just use a paper clip.
 Simplify financial projections to just two pages.
 Include key metrics: number of customers, number of close
competitors. Could provide a better understanding than financial
projections.
 Always make explicit your assumptions.

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Executive Summary
 Sketch this first to have an idea of what you need.
 But, finalize this last after you get everything ready.
 Neither an introduction nor an abstract.
 Your business plan is not a guest; do not waste space by
introducing it. No drama or suspense.
 This is not an abstract, so do not make it just one paragraph.
 Do not exceed two pages.
 Merely a condensed essence of everything you have in the
rest of the document.
 Acid test: Throw away the rest of the business plan. Will you
still give this plan a second look?

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The Company
(What do you do?)
 What problems it tries to solve?
 What is the “needs”? Or, can you create “wants”?
 Who have these problems? (Just explain briefly)
 What is your Value Proposition: increase revenues,
reduce costs, increase speed, expand reach, eliminate
inefficiency, increase effectiveness, or whatever.

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The Company
(What do you do?)
 What is the solution?
 Explain plainly your main idea to solve the problem you
just mentioned.
 Use plain English and simple terms. Forget jargons or
acronyms.
 A company is broader than products or services. So, do
not confuse the two. Specific products can appear or
disappear but the main idea stays the same.
 Focus on your main idea first.

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The Company
(What do you do?)
 Also, investors do not like a single-product company,
which is usually the case if you first start. So, give the big
picture first.
 Then, you can be more specific in what you are offering:
Software, hardware, service, combination?
 Provide more descriptions on your key products or
services.
 Explain how other products will differ or be similar to
these ones.
 More details can go in the Appendix.
 Why can it solve the problem? (But do not go into too
much details and avoid technical terms)
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Main Framework
FEASIBILITY VALUE
Is it doable? Is it worth
Technology (availability,
access, risks, entry barriers)
doing?
Financial (funds required,
Market feasibility (product
funds available, forecasts,
MARKET need, competition, growth,
price sensitivity)
economy, politics, timing)

Can I do it? Do I want to do

What do I need?
Who else do I need? Can I
it?
Why do I want this?
YOU get their help?
What am I willing to give
Why me?
up?
When will I give this up?

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Technical Feasibility
(Why is it doable technically,
if products are technical?)
 The idea could be great but if it cannot be realized
physically, what for?
 Questions to think about (but you do NOT have to
answer every one of them. Pick wisely)
 Is the technology for your product already available, or is it still in
development?
 If the latter, what stage of development is it in and what can go
wrong?
 If the former, is anyone else using it to develop the same
product/service as you?
 If not, why has no one done so yet?
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Technical Feasibility
(Why is it doable technically,
if products are technical?)
 If so, who are they and how does that affect your prospects?
 What kind of entry barriers for the future does your technology
provide?
 How long would those entry barriers last?
 What are your technological risks?
 What other nascent technologies might become competition in
the future?

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Commercial Feasibility
(Why is it doable
commercially?)
 What do you know about your customers?
 Who are your typical customers? (some demographic characters)
 What do you know about their purchasing power or buying pattern?
 Will the customer pay enough? Can you charge enough?
 What critical factors will lead you most quickly to your customer
base?
 What do you know about the customers in aggregate, i.e. the
market?
 How large is the market?
 What is its structure?
 How fast is it growing?
 Where could future competition come from?
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Marketing, sales and distribution (How to

get products to customers and money from
customers?)

 How would customers know about your products?

 Who will actually sell the product to customers if
needed?
 How would the products get to the customers?
 Direct or indirect distribution?

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The team
(Can YOU do it and Why do you want to
do it?)

 Can you do it?

 Who are you?
 What is your experience?
 What is your education?
 What makes you qualified to do the task?
 Why should I believe that you can do it and part with my
money?
 Why do you want to do it?
 What is your INTERNAL motivation? Why do you want to
do this—really?
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The financial promise

(Is it worth doing?)

 How do you plan to make money?

 Cost of customer acquisition
 A good VC can tell if an idea is worth doing or not
without looking at the numbers.
 What are your ASSUMPTIONS?
 Based on those assumptions:
 What is the ROI?  How much return would I get?

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The financial promise

(Is it worth doing?)

 What is the cash burn rate?  How long before you run
out of cash?
 What is the breakeven time?  When will you get my
money back?
 What is the growth like?  Any prospect in the future or
is this it?
 What about other possible scenarios?  Do a sensitivity
analysis because as we all know, things do not always
go as planned.

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The financial promise

(Is it worth doing?)

 Finally, how much money do you want from me?

 This is the amount of funding you are asking for now.
 This is generally the minimum amount to reach the next major
milestone.
 If you want to take more investors later, make that clear and
state the expected amount.

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Takeaways
 Business model is the secret sauce
 Not obvious, maybe hard to decipher
 Requires creativity to come up with a good
one
 Applicable across industries
 Executive summary is key in business plan
 Treat it as a labor of love!

David Gomulya. Copyrighted. (C)