Envisage. Stratigize. Execute: IDEA to BUSINESS
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Coming up with a brilliant idea for your venture is just the beginning, taking it forward is where many people flounder. Session at Eximius, the Entrepreneur Summit at IIMB on how to go about implementing your idea.
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Envisage. Stratigize. Execute: IDEA to BUSINESS
- 1. Anjana Vivek; beanie@venturebean.com Envisage. Strategize. Implement. Taking an Idea to a Business Eximius @ IIMB 5th August 2017 Bengaluru
- 2. VentureBean Consulting Private Limited Envisage: At the start Envisage: The Business Model Canvas Strategize: Setting Goals and Planning Strategize: Business Plan & Funding Strategy Implement: Governance: Periodic Stock Take Implement: Illustrative areas: Sales and Valuation Agenda 2 2
- 3. VentureBean Consulting Private Limited AS YOU START Do take time out to think/reflect… • WHAT are the strengths – That you Can bring to your venture – How can you bring this to your venture • WHAT are constraints to either – Address or – Accept (and work keeping this in mind) 3
- 4. VentureBean Consulting Private Limited AT THE START Reflect on your idea/solution … • WHO can benefit from this? – Is this actually going to be of help? How? • WILL they pay you for this? – Can this payment come more than once, repeatedly? • HOW will you sell this? – Pricing and profitability are also to be factored. 4
- 5. VentureBean Consulting Private Limited SNAPSHOT VIEW • Can you explain to a stranger in 1 minute what your business/idea is about? Please articulate this in 1-2 sentences • Test with a couple of persons and see if it appeals to them and if you are satisfied. 5
- 6. VentureBean Consulting Private Limited Envisage: At the start Envisage: The Business Model Canvas Strategize: Setting Goals and Planning Strategize: Business Plan & Funding Strategy Implement: Governance: Periodic Stock Take Implement: Illustrative areas: Sales and Valuation Agenda 6 6
- 7. VentureBean Consulting Private Limited WHAT IS A BUSINESS MODEL • Business model From Wikipedia, the free encyclopedia A business model describes the rationale of how an organisation creates, delivers, and captures value (economic, social, or other forms of value). The process of business model construction is part of business strategy. 7
- 8. VentureBean Consulting Private Limited 8
- 9. VentureBean Consulting Private Limited BMC: 9 building blocks BUSINESS MODEL CANVAS (BMC) • Customer segments • Value propositions • Channels • Customer relationships • Revenue streams • Key resources • Key activities • Key partnerships • Cost structures SOURCE:http://www.businessmodelgeneration.com/canvas • Acknowledgements: – Wikipedia, the free encyclopedia – http://www.businessmodelgeneration.com – http://www.businessmodelhub.com – Alexander Osterwalder • You may like to think through the elements of the BMC for your venture 9
- 10. VentureBean Consulting Private Limited EXAMPLES • Direct sales • Brick and mortar • B2B • B2C • Freemium • Franchising • etc… Can you think of some more? 10
- 11. VentureBean Consulting Private Limited Envisage: At the start Envisage: The Business Model Canvas Strategize: Setting Goals and Planning Strategize: Business Plan & Funding Strategy Implement: Governance: Periodic Stock Take Implement: Illustrative areas: Sales and Valuation Agenda 11 11
- 12. VentureBean Consulting Private Limited Setting Goals and Planning • Plan in 3 dimensions of time: short term, medium term and long term – Long term: dreams and aspirations drive you and the business – Short term: details are easier to think through, assumptions are fewer – Medium term : more of guess work and trend analysis and less of data • It is good to periodically go back and forth between these time horizons... 12
- 13. VentureBean Consulting Private Limited Setting Goals/Targets Planning for Alternate scenarios for eg: • Funded/Non-Funded/Boot-strap • Pessimistic, realistic and optimistic • With rapid expansion versus a slower growth mode • With alternate business models; impacting strategy and cash flow • And more.. 13
- 14. VentureBean Consulting Private Limited Other Aspects • Are You Ready for Change/Growth and getting into the Next Orbit, all rockets do not get to next stage, some fall back into this orbit. Think through: – Stepping out of comfort zone – Execution issues – Risk of failure – Financial challenges – Leading a larger company, ability to let go – Inclination to grow into next level of leadership 14
- 15. VentureBean Consulting Private Limited Envisage: At the start Envisage: The Business Model Canvas Strategize: Setting Goals and Planning Strategize: Business Plan & Funding Strategy Implement: Governance: Periodic Stock Take Implement: Illustrative areas: Sales and Valuation Agenda 15 15
- 16. VentureBean Consulting Private Limited Business Plan • An output based on business model and strategy, expected to evolve over time • To be forward looking, based on past knowledge of promoters and their work experience in the existing or new venture • Assumptions to be tested to see if they will be valid for execution, i.e. to demonstrate this is not a business plan on paper alone • Risks to be factored in plan • Multiple scenarios are looked at, revenues expected are discounted, expected costs and expected cash flows factored, sensitivity to key parameters checked
- 17. VentureBean Consulting Private Limited Seeking equity investment? Must haves… • High upside potential • Potential for extraordinary returns to investor • Exit route plan to provide the returns to investor • This implies – Rapid Growth, i.e. – Total addressable market is really high – Company has Potential to address this market – Company has Ambition to address this market – Company has Capability to Execute to achieve high growth – Risks are articulated – .. Etc MUST Have Key Requirements: • TEAM with Execution Capability and • Huge Addressable Market
- 18. VentureBean Consulting Private Limited Investors: One Slide Checklist • HNIs, informal and formal angel groups • Seed Funds • Venture Capital • Private Equity • Banks exploring innovative ways to fund SMEs • Strategic Investors • Corporate Funds; (Family) Business Groups, Indian & Global – Directly and/or through a special division or subsidiary – For employees alone or open to public – As intellectual and/or financial capital with other facilities • Government supported funds • Impact Investors • Incubators • Accelerators • Co-Creators • Crowd funding • Online funding platforms 18 Which One Could be the … Right Fit for your Venture?
- 19. VentureBean Consulting Private Limited What Investors Look for • INVESTOR FIT: Mandate and Fund Philosophy, stage of investment cycle, other portfolio companies • Team: Education, Experience, Multi-disciplinary, co- founder team cohesiveness • Past Track, of team members both in and before this venture, of business • Idea/Business Growth and history thus far, ability for growth and sustainability • Competitive Scenario • Financial plan and funding strategy
- 20. VentureBean Consulting Private Limited Due diligence reviews (DDR) Investment decision is based on DDR, some illustrative reviews are below. Some of these or aspects of these may be done in-house by the investor, others may be out-sourced to experts and professionals: • Business • Market • Accounting • Tax and Legal • Technical • HR
- 21. VentureBean Consulting Private Limited An Illustrative Sales Quality Review.. • Illustrative indicative parameters, for DDR – Sales Quantity – Quality of revenue - in terms of product/service/vertical/location etc. – Average revenue per employee – Number of customers, number of high value customers – New customers added – Customers lost – Pipeline customers – Customer acquisition strategy 21
- 22. VentureBean Consulting Private Limited A BUSINESS PLAN COMMUNICATES… • Many times, a reader’s perception of your business/idea will be based on the business plan you prepare • Different persons will look for different things, a banker will check if a loan can be repaid, the VC will look for value multiples on exit • Substance and form matter, more so, when hundreds of plans are reviewed 22
- 23. VentureBean Consulting Private Limited BUSINESS PLAN • Should be self speaking: ie with limited clarification required (including with regard to abbreviations & technical terms) • Reader friendly: Key information that you want to convey should not be hidden amongst too much details Do not think only of what you want to share, rather think about what your potential reader may want to know 23
- 24. VentureBean Consulting Private Limited IN SUMMARY: Business Planning As an entrepreneur • What are your strengths/weaknesses? • What do you like to do or think you like to do? • What do you think you are good in? • How would you bring this into your business? As a business • Have you thought about the business model? • Have you thought about the soft issues such as team dynamics, roles and responsibilities, leadership plan? • Have you thought about your business plan structure? • Have you thought about how you will pitch your plan? 24
- 25. VentureBean Consulting Private Limited Envisage: At the start Envisage: The Business Model Canvas Strategize: Setting Goals and Planning Strategize: Business Plan & Funding Strategy Implement: Governance: Periodic Stock Take Implement: Illustrative areas: Sales and Valuation Agenda 25 25
- 26. VentureBean Consulting Private Limited AT THE START • Stock Take of key financial and non-financial parameters (for example) : – Product/service offerings – Revenue, both quantity and value – Customer categories – Employees, technical and non-technical – Kinds of customers / categories – Key cost elements – Balance in bank accounts – Advisors on board – Number/category of investors – etc.. 26
- 27. VentureBean Consulting Private Limited Monitor Growth Parameters Illustrative: • Sales / Customers • Profit • Cash-flow • Other such as employees; multiple city branches; retail outlets etc. • .. etc • Value? 27
- 28. VentureBean Consulting Private Limited Periodic Stock Take • A well prepared MIS/Flash report is a great tool to support decision making and enable any course correction required. • It will capture the flavor of your company and the industry sector in which it operates. • Some items are monitored more regularly than others, for example, cash (which includes Bank Balances) is monitored on daily basis. Sales and some costs may be monitored on a monthly basis. You design and monitor this.. it is Your Report of Your Business Health 28
- 29. VentureBean Consulting Private Limited Envisage: At the start Envisage: The Business Model Canvas Strategize: Setting Goals and Planning Strategize: Business Plan & Funding Strategy Implement: Governance: Periodic Stock Take Implement: Illustrative areas: Sales and Valuation Agenda 29 29
- 30. VentureBean Consulting Private Limited Product/Service Offerings: Analysis LOOKING INSIDE • Product Lines • Service Lines • Combination solutions (product/service) – bring some tangible into the intangible – tangibilise the intangible; • Pricing – an art and science • Costing – math with assumptions 30
- 31. VentureBean Consulting Private Limited Sales (Plan): Analysis LOOKING OUTSIDE • Segments – B2B – B2C – Retail – online etc. – Analyse % of sales and quantity of sales in each category (as applicable) • What are the activities to reach out and get revenue from each of these segments? 31
- 32. VentureBean Consulting Private Limited Sales (Plan): Analysis • Review findings / Revisit plans – Where is maximum sales coming from? – Where is maximum effort made for sales? – Are you spreading yourself too thin? – Are you missing out on low hanging fruit? • Can you tweak your sales plan? • Can you target segment-by-segment sales in a phased manner? • Can you unbundle and bundle offerings to be more meaningful? • What is your pricing strategy? • Go beyond sales, where is value to customer, where is value perceived by customer? 32
- 33. VentureBean Consulting Private Limited Sales: More analysis • Sales – Quantity (In numbers; in amount) • Sales – Quality: for example – category A customers – ie Customers with revenue over Rs.1000 cr; MNCs; listed companies; premier organisations etc.. – Number of high value customers – Percentage of revenue from top few custumers – in terms of product/service/vertical/location etc • Customers churn/T.O : lost and gained in a period • Average revenue per customer • Profitability: segment-category wise • Pricing plans, alternates, for differently bundled offerings 33
- 34. VentureBean Consulting Private Limited Sales Pipeline • How can you increase the pipeline funnel – List network contacts – Cold calls – move out of your comfort zone and set ambitious/aggressive targets: for eg. how can you double number of meetings this week – Social media, website tweak... etc… other? • Periodically review sales/marketing strategy and execution with results.. i.e. track performance with activity • What could be barriers to sales growth; how can you overcome these? 34
- 35. VentureBean Consulting Private Limited Sales Collection: Governance • Is your billing timely? • What is the mode of receipt? • Are you collecting on time? .. Advance/upfront? These basics are often ignored.. 35
- 36. VentureBean Consulting Private Limited Valuation • Identify valuation methods and drivers in your industry – Number of customers? – Revenue? – GMV? – Number of unique views? – Average revenue per customer? – Profitability? – Cash Flow generated? – Combination of above? – Other? • What could be – Value drivers – Value depleters 36
- 37. VentureBean Consulting Private Limited Valuation • Valuation is based on – intangibles and – tangibles • Valuation is often computed as a multiple of – Revenue – EBIDTA – PAT – Cash Flow – Capacity/Quantity – Key value driver for industry; this changes from time to time; especially in initial stages of industry development (i.e. page views; user base, clicks etc..) 37
- 38. VentureBean Consulting Private Limited Valuation • At the start value is mostly intangible, look at how this can be made tangible.. • For eg. service – through content, follow up calls, showcasing feedback, etc. • Can you think of how you can demo value in early days of your business 38
- 39. VentureBean Consulting Private Limited Valuation Some examples of value demonstrated: • Association with credible organisations (incubation, acceleration etc..) • Team: Reputed/trustworthy; experienced/multi-disciplinary • Marquee/discerning customers • Other stakeholders associated – Advisors, investors, bankers, well known professional service firms etc. • Feedback/testimonials from reputed persons • Ability to charge premium pricing • Ability to address a huge market – i.e. ecommerce companies, value without profits?? Sustainable or not? For more: 5 Points on Valuation and Negotiations… OR … how You can get a better price 39
- 40. VentureBean Consulting Private Limited In Summary • Thank you for the patient hearing • Additional information/articles/resources at: @ The VentureBean K.Hub: (Knowledge Hub) • www.slideshare.net/anjanavivek : Content TOP 4%; 5% Viewed 2013;2014 • http://www.linkedin.com/company/venturebean- consulting-private-limited • https://in.linkedin.com/in/anjanavivek • https://twitter.com/VentureBean • Email to : beanie@venturebean.com 40
- 41. VentureBean Consulting Private Limited Thank You! 41