activities and costs (v. 2017-2018 eng)

Activities and Costs

Frieda Brioschi / Emma Tracanella frieda.brioschi@gmail.com / emma.tracanella@gmail.com

IED, 14 Nov 2017Lesson 5/2017-2018

5. Actiivities & Costs

Course program

1. Start-ups

2. Business Model & Canvas

3. Value Proposition Design

4. Customers & Market

5. Activities & Costs2

5. Actiivities & Costs

The Business Model CanvasDuring last lesson we discussed what is a business model and how fulfill a business model canvas, looking into each part:

• Value proposition

• Customer segments

• Channels

• Customer relationship

• Revenue streams

• Key resources

• Key partner

• Key activities

• Cost structure

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5. Actiivities & Costs

List the costs you foresee if your core business is making bicycle

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5. Actiivities & Costs

…according to you/1 - Money

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• 500euro (only 1 person!)

5. Actiivities & Costs

…according to you/2 - materials

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• Bicycle Wheel, air pump, polishing, making the bicycle, repair, oil, spray paint, bells, seats, baskets, tools

• materials

• Materials, production, labor

• Materials for production + marketing

• Components/ materials Advertising Shop renting Employees

5. Actiivities & Costs

…according to you/3

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• Production, promotion, research (maybe traveling), employees • Production, marketing, transport • Components, assembly, marketing, workforce, infrastructure, distribution,etc • producing part marketing part designing part • The cost for product, the cost for patent it • Aesthetics design, distributor, shops, branding • Raw materials, stores, tax, bills and then adv, website maintenance,

sponsorship and marketing analysis • Production, materials, publicity, employees, various expenses • original materials, making process, marketing strategy • Materials, reaserch, manpower, technology, manufacture fee, desig • Employees, material, transportation, maintenance of the machines,

machines. • Product, graphic designer, production

5. Actiivities & Costs

…according to you/4 - ?

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•for advertising of my project

•Buying the bikes.. maintenance of the bike.. storage rent for the bikes.. staff salary.. quality checkes.. events and promotion money .. finally, extra cash "incase of a rainy day”

•Aesthetics design, distributor, shops, branding

5. Actiivities & Costs

All you need to know about costs

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5. Actiivities & Costs

Costs

In production, research, retail, and accounting, a cost is the value of money that has been used up to produce something, and hence is not available for use anymore.

Two kind of costs:

• Direct costs

• Indirect costs

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5. Actiivities & Costs

Direct costsCosts that can be identified specifically with a particular project or activity, or that can be directly assigned to them with a high degree of accuracy.

Direct costs generally includes:

• Salary and wages

• Material, supplies and equipment purchased directly for the specific project

• Communication and travels costs

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5. Actiivities & Costs

Indirect costsCosts that are not classified as direct

Indirect costs generally includes:

• Salary of administrative staff providing normal support activities

• Office supplies, computers

• Local telephone calls

• Memberships

=> Overhead

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5. Actiivities & Costs13

http://www.ryansharkey.com/blog/direct-vs-indirect-costs-government-contracting

5. Actiivities & Costs

BykesDirect costs:

• Metals

• Wages for assembly

Indirect costs:

• Abrasive, glue, pink

• Rent

• Insurance14

5. Actiivities & Costs

Actual cost of doing business

Before you can price a product or a service, you need to know your cost to produce it.

A start-up usually should divide costs in one-time and recurring.

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5. Actiivities & Costs

Common start-up costs• market research • preliminary accounting and legal advice • tenancy/lease bond, stamp duty and lease agreement

advice • telephone/internet installation • statutory requirements such as licences and insurance • power connection and bond • signage and initial marketing • equipment, fixture and fittings purchases • staffing and wages • initial raw materials and/or stock purchases.

16 https://www.business.qld.gov.au/business/starting/starting-a-business/calculating-your-costs-when-starting-a-business

5. Actiivities & Costs17

5. Actiivities & Costs

How much does it cost to start a business?

Be sure to identify all the possible costs: • Start-up expenses, e.g. legal, regulatory,

insurance, staff, rent advances, office supplies and stationery, consultants, etc.

• Start-up assets, e.g. cash in the bank, starting stocks, office furniture, etc.

• Recurring start-up costs, e.g. rent, salaries, etc.

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http://businessingambia.com/startup-costs-start-business/

5. Actiivities & Costs

Photographer

• How much charge a photo?

• Minimum fee?

• No costs?

A useful tool: the Cost of Business calculator. It list annual expenses, but it depends on your inputs which can be hard to estimate.

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5. Actiivities & Costs

Cost of doing business calculator/1

Expenses

• Office and/or studio (rent, mortgage payments, taxes, insurances, home maintenance, …)

• Phone (cell and/or landline and faxes) – remember to include also the cost of the phone itself

• Photo/Video/Audio Equipment and Accessories

• Equipment services and Repairs

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https://nppa.org/calculator

5. Actiivities & Costs

Cost of doing business calculator/2

• Computer(s) (harware and software)

• Broadband internet

• Web hosting/Portal services

• Vehicle Expenses (Lease, Insurance, Maintenance)

• Office supplies and Furnitures

• Postage and Shipping

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https://nppa.org/calculator

5. Actiivities & Costs

Cost of doing business calculator/3

• Professional Development

• Advertising and Promotion

• Subscription and Dues

• Equipment and Business Insurance

• Health Insurance/Deductibles/Copays

• Legal and Accounting Services

22 https://www.calcxml.com/calculators/bus02

5. Actiivities & Costs

Cost of doing business calculator/4

• Taxes and Licenses (Business and Self-Employment)

• Office Assistance (Payroll, Answering Service, Intern, etc.)

• Utilities

• Travel and Entertainment

23 http://www.wsj.com/public/page/news-small-business-startupCalculator.html

5. Actiivities & Costs

Cost of doing business calculator/5

• Income factors

• Desired Annual Salary

• Non-assigment Income

• Number of Days You Can Bill Per Year

24 https://www.business.qld.gov.au/business/starting/starting-a-business/calculating-your-costs-when-starting-a-business

5. Actiivities & Costs

Cost of doing business calculator /6

https://nppa.org/calculator25

5. Actiivities & Costs

Money doesn’t make (always) the difference

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5. Actiivities & Costs27

5. Actiivities & Costs28

5. Actiivities & Costs

Perceived Value

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5. Actiivities & Costs30

5. Actiivities & Costs

Value

The extent to which a good or service is perceived by its customer to meet his or her needs or wants, measured by the customer’s willingness to pay for it.

It depends more on the customer’s perception of the worth of the product than on its intrinsict value.

How do we create the perception of value when we talk to our customers?

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5. Actiivities & Costs32 https://beyondphilosophy.com/comparing-perceived-value-drivers-employees-customers/

5. Actiivities & Costs

Price vs Value

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http://www.acceleratenow.org/what-is-value-investing-part-2/

5. Actiivities & Costs

Pricing strategies

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https://julieaskewblog.wordpress.com/marketing-principles/pricing-strategies-elasticity/

4. Market and Value5. Actiivities & Costs

Gillette Fusion

• Amazon price: 19.25$

• 8 cartridges

• Cost/cartridge: 2.41$

• You need the razor (11.49$)

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4. Market and Value5. Actiivities & Costs

Gillette Custom Plus Disposable

• Amazon’s price: 20.97$

• 30 razors

• Cost/razor: 0.70$

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4. Market, Value and Business Model5. Actiivities & Costs

Gillette Fusion vs. Custom Plus

• Prices

• 19.25$ vs. 20.97$

• 8 cartridge vs. 30 razors

• Cost in use

• 2.41$ vs. 0.70$

• Additional perceived value justify the additional cost in use

• Durability of blade

• Comfort

• Less irritation

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4. Market, Value and Business Model5. Actiivities & Costs

Gillette idea

By providing something at below the market price (the razor), you can create a market for a secondary product (the blade) upon which you make ongoing profits.

The mark-up on the secondary products is disproportionate relative to their cost so were highly profitable for the manufacturer.

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4. Market, Value and Business Model5. Actiivities & Costs39

https://chadbockius.com/2017/08/02/life-lessons-buying-stuff/

4. Market, Value and Business Model5. Actiivities & Costs

3M Scotch® Tape

• Amazon’s price: $1.70

• Lenght: 650 inch

• Cost/inch: $0.003

• Cost to hang a poster: $0.01

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4. Market, Value and Business Model5. Actiivities & Costs

3M Scotch® Command Strips

• Amazon’s price: $2.70

• 12 strips

• Cost/strips: $0.08$

• Cost to hang a poster: $0.32

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4. Market, Value and Business Model5. Actiivities & Costs

Tape vs. 3M Scotch® Strips• Price

• $1.70 vs. $2.70

• Using Scotch Tape, the user can hang 75 posters vs. 3 for the command strips

• Cost in use

• $0.01 vs. $0.32 to hang 1 poster

• Additional perceived value justify the additional cost in use

• Less damage to wall

• Simplicity to remove

• Durability

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4. Market, Value and Business Model5. Actiivities & Costs

CocaCola

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5. Actiivities & Costs5. Actiivities & Costs

Nespresso

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What else?

4. Market, Value and Business Model5. Actiivities & Costs

Lacoste

• Founded in 1933 by the tennis man Rene Lacoste

• At the end of 1990 the company change its strategy: marketing, retails outlets, product range, ...

• Sale of t-shirts in limited series

• Re-establishing Lacoste as “a distinctive premium brand”

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4. Customers & Market46

Case study: Neck Hammock

The Most Portable Neck Pain Solution Ever

https://tomsfinds.com/neck-hammock/a100-001-i1/

https://www.kickstarter.com/projects/neckhammock/the-neck-hammock-best-neck-pain-relief

5. Actiivities & Costs

Making an app

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4. Market, Value and Business Model5. Actiivities & Costs48 https://www.comscore.com/Products/Audience-Analytics/Mobile