42629 lecture 5 pt 3

Integrated Product Development

ForecastingJakob A. Bejbro [email protected]

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“Original material by Jakob A. Bejbro Andersen for course 42629 – Innovation and Product Development Department of Mechanical Engineering, The Technical University of Denmark”

mailto:[email protected]

ForecastingRealizing the potential

2012Original material by Jakob A. Bejbro Andersen for course 42629 – Innovation and Product Development Department of Mechanical Engineering, The Technical University of Denmark

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Time

Financial Balance

Introducing the hockeystick- A market potential has no value to investors in itself.- There has to be a credible plan for realizing this potential.- The following questions need to be answered:

- When will you start selling?- When will ”break even” be reached?- When can the investor achieve an ”exit”?- How much can the shares be sold for?


4

Requisites for the hockeystick (exponential growth)

• A solid execution strategy.– Segment 1, then 2, then 3 ... (remember the bowling pins)

• A good knowledge of the customer / market.• A credible sales approach.


5

Time

Sales rate Market saturation

The lifecycle of a market (segment)• Unexploited markets tend to have the following

characteristics:– Early stage sales; driven by enthusiasts, lack of track record.– Breakthrough; track record established, sales increasing drastically.– Business as usual; Market saturated, few new customers.

Breakthrough Business as usual

Early stage sales


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Planning for continued growth • As capital (liquidity) and track record is established…• … the basis is formed for going into new segments.• The specific strategy for entering into new

segments is a key parameter for investors.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Seg 1

Seg 2

Seg 3

Seg 4

Seg 5


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Projecting sales• Sales are key as they validate the market for the offering.• Investors rate sales over any other dimension.• As with market estimates, there is a top down and a

bottom up approach. – Again, it is beneficial to use both approaches.

SALES


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Choosing a sales approach• Business to Business sales (B2B)

– The same product can be sold to different levels of an organisation.– As a general rule:

• Higher in organisation you find more purchase power, but longer sales cycles.

• Lower in the organisation you find smaller budgets, but shorter time from introduction to actual purchase.

– Exceptions are however many:• Strategic level can be used to push through sales• The operational level can be to hung up on formal requirements.

• Business to Customer (B2C)– Through distributor/partner.– Direct sales.– Web portal.

• Composite models (B2B/B2C) – Facebook, adwords etc.


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Exercise 5a:(You are still with the brewery)

For one of the identified segments:

Identify two or more sales approaches:

1. _________________________2. _________________________3. _________________________4. _________________________

• How will you sell your own idea?


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Projecting sales (bottom up)

• Describe sales going from day to day • What steps need to be taken for each sale to be made?

• Which resources does it require?• How can the resources required be minimised?

Establish contact

Create materials

Specify solution

Formulate quotation

Negotiate terms

Sale!

Wk 1 Wk 2 Wk 3 Wk 4 Wk 5 Wk 6


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C?

The sales funnel (bottom up II)

First meeting

Qualification

Purchaseorder

C5C2C1 C6C4

C7

First meetingsT1 hours per meeting

T2 hours per lead

T3 hours per lead

Time usageNumber of candidates

N

N/10 (?)

To be reduced


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Exercise 5b:

For one of the identified sales approaches,list important tasks:

Task 1: _________________________Task 2: _________________________Task 3: _________________________Task 4: _________________________Task 5: _________________________

• What tasks will be important for yourown product?


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Projecting sales (top down)

• To get a reality check on sales figures, a number of approaches can be used:

– Check media for sales intel (companies like to boast).– Look adoption rates in for similar products/services.

• As a venture company, you should be ambitious:– ”We expect to match or even beat on the sales figures of Company X”– If you are no better than your competitor – why enter the market?

ED

GE

FL

OW

EDGEFLOWSales forecasting (slides courtesy of EdgeFlow Aps)

ED

GE

FL

OWSales forecast - bottom up

Based on sales to strategic level in large companies.

Motivation for sales approach (to strategic level):• Selling to as high a level as possible

• Enables us to add CSR arguments to sales pitch

• Requires limited sales force (favourable at an early stage)

Procedure- Proces validated with sales experts.

- Milestones and target sales # validated

with customers (where possible)

- Projected hit rate (8-12%)

Sales forecast excel sheet

ED

GE

FL

OWSales forecast – top down

Based on sales to strategic level in large companies.

Procedure- Identify competitors Comp 1, Comp 2 and Comp 3 (wind turbine

manufacturers)

- Look for mentioning of sales figures in media (Comp 1 shown as example).

- Build sales history and projection from data obtained.

Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6

”…40 units sold in first 8 months of operation…”

”…Large order with local utility – 10 turbines sold” ”Comp 1 enters

DE market – 15 units already sold”

Year in

market

”Comp 1 lands framework agreement w…”

”…ramps up production to 30 units per month”


17

Q?


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Focus for Fridays Group Work (double diamond)

• Work on specifying and rating segments.• Knowledge of customer needs required– how will you obtain it?• Start formulating your value proposition.

42629 lecture 5 pt 3

Education

projecting sales sales

bejbro andersen

direct sales

sales approach business

business sales b2b

identified sales approaches

credible sales approach

investors rate sales