business models growth and value creation-masterclass microsoft ventures

Business Models: Growth & Value Creation

MasterClass @ Microsoft VenturesBangalore, 8th April 2015

Anjana Vivek; [email protected]

VentureBean Consulting Private Limited

Business Models – A Brief Introduction

Stock Take – At the Start

Growth: Sales and Beyond Sales

Valuation and Value Creation

Other Aspects to Consider

Appendix

Agenda

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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.

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EXAMPLES OF INDIAN COMPANIES…

Where the business model was different from those existing at that point in time:

• Bharti Airtel

• Big Bazaar

• RedBus

• Café Coffee Day

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Business Model Canvas: 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

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AT THE START

• Stock Take of where you are today:– Revenue

– Number of offices

– Employees

– Lines of business/products/service

– Kinds of customers / categories

– Key Cost elements

– etc..

• Create an MIS that you can work with; for eg. to manage your health & wellness you start with measuring a few key parameters like Weight (vs. age); Lipid Profile, Sugar Count, Blood Pressure..

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AT THE START – Plans/Goals/Vision

• Are you able to articulate what your business is

about in 1-2 sentences

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Next Setting Goals/Targets: Planning

• In 3 dimensions of time: short term, medium term and long term

– Dream: For the long term.. dreams and aspirations drive you and the business

– Launchpad: For the short term, details are easier to think through, assumptions are fewer

– Directional: For the medium term it is more of guess work and trend analysis and less of data

• It is good to periodically go back and forth between these time zones and check for patterns, consistency, thought process..

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Setting Goals/Targets

Planning for Alternate scenarios for eg:

• Funded/Non-Funded/Boot-strap

• Pessimistic, realistic and optimistic

• With alternate business models; impacting strategy and cash flow

• And more..

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Growth

Key Growth Parameters

• Sales / Customers

• Profit

• Cash-flow

• Other such as employees; multiple city branches; retail outlets etc.

• .. etc

• Value

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Sales: Analysis

• 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?

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Sales: Analysis

• Review findings– 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?

• Go beyond sales, where is value to customer, where is value perceived by customer?

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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

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Sales Pipeline

• Categorise and list names as:

– Existing/Existing Biz

– Existing/New Biz

– New Customers/New Biz

– Not yet on horizon (particularly when you are looking at sales forecast say 6 months from today, some potential customers may not yet be on horizon

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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

– .. 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?

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Governance

• Is your billing timely?

• What is the mode of receipt?

• Are you collecting on time? .. Advance/upfront?

• Is there an MIS to monitor performance; Health check is not a one-time exercise, it is periodic.

More on MIS at Small Data .. not just ..Big Data – Part 1 :

Check Appendix 1

These basics are often ignored..

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https://www.linkedin.com/pulse/20141109094712-2098566-small-data-not-just-big-data-part-1?trk=mp-reader-card


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

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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..)

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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

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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

For more: 5 Points on Valuation and Negotiations… OR … how You can get a better price

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https://www.linkedin.com/pulse/20140630153355-2098566-5-points-on-valuation-and-negotiations-or-how-you-can-get-a-better-price?trk=mp-reader-card


Other Aspects to consider

• Are You Ready for 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

– Leading a larger company, ability to let go

– Inclination to grow into next level of leadership

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In Summary

• Thank you for the patient hearing

• Delighted to invite you to view/follow for periodic insights, class notes & more, from thought leaders, academicians…

@ The VentureBean K.Hub: (Knowledge Hub)

http://www.linkedin.com/company/venturebean-consulting-private-limited

www.slideshare.net/anjanavivek

https://twitter.com/VentureBean

• Contact for more information and inputs: [email protected]

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http://www.linkedin.com/company/venturebean-consulting-private-limited

http://www.slideshare.net/anjanavivek

https://twitter.com/anjana_vivek

mailto:[email protected]


Appendix 1- Sample MIS items

• Quantity of Revenue: Sales amount - Invoices raised for the month

• Quality of revenue : (Illustrative)– Per lines of business (i.e. SBUs/product varieties/Service Offerings etc.)

– Franchise/own/other models

– Location/National/International

– No of clients/customers billed

– New clients added / Repeat clients

– Cash inflow for the month from sales

– Write/off i.e. non payment by customers

– Customers attrition

– Pipeline customers – order book

• Expenses – key heads and total monthly expense;

• Cash balances, cash inflow and cash outflow

• Unusual events and impact, eg. sale of land in the period reported

• … AND so on

• Add a couple of points explaining any increase/decrease; i.e. management comments/observations and next steps needed

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Thank You!

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business models growth and value creation-masterclass microsoft ventures

Small Business & Entrepreneurship

business strategy

short term

medium term

sales valuation

long term dream

quantity of sales

value economic

forms of value