Financial BlocksBusiness Model Canvas

Session Frame

Revenue StreamFinancial StatementsCost Structure

Introduction

•  90% of new businesses fail in the first 3 years because they fail to understand their costs or what it will take to create the goods and services they have promised in their value propositions.

• Describes the most important costs incurred while operating under a particular business model. Creating and delivering value, maintaining Customer Relationships, and generating revenue all incur costs.

Key Questions

• What are the fundamental costs derived from my business model?

• Which Key Resources represent a significant expense to the business?

• Which Key Activities represent a significant expense to the business?

• How do your Key activities drive costs?• Are the above mentioned activities matched to

the Value Propositions for your business?

Cost Structure

Cost Structure

• When an entrepreneur has effectively figured out their key resources, key activities and key partnerships the aforementioned costs become easier to calculate.

• Must evaluate the cost of creating and delivering the value proposition, creating revenue streams and focus on long-term customer relationships.

Types

Cost Driven Value Driven

- Reduce Cost- Cheap price

- Reduce internal cost - Efficiency operation

- Focus on value - Focus on creation

- Create customer experience

Characteristics

Fixed Cost Variable Cost

- Exist regardless the volume produced

- Manufacture industries generate high fixed cost

- Change by time

- Depend on the volume - Sensitive to changes in

demand & supply - Represented by utilities &

raw materials

Characteristics

Revenue Stream

Revenue Stream• For what value is each Customer Segment truly

willing to pay? Successfully answering that question allows the firm to generate one or more Revenue Streams from each Customer Segment.

• Each Revenue Stream may have different pricing mechanisms

• Transaction revenues: Resulting from one-time customer payments.

• Recurring revenues: resulting from ongoing payments to either deliver a Value Proposition to customers or provide post-purchase customer support.

Types

Pricing Strategy

• Cost-based pricing: Set your price as a multiple of cost, or cost plus a determined amount.

• Value-based pricing: Base your price on what your product and service is worth to the buyer.

• Market-based pricing: Let the market determine the price.

Revenue Generation Asset sale

Ownership rights are sold of a physical

product

Usage fee

Use of a particular service is sold, the

amount paid depending on the usage.

Subscription fees

continuous or repeated access to a service is

sold.

Lending/Renting/Leasing

granting someone the exclusive right to a

particular asset for a fixed period in return for

a fee

Licensing

the content owners retain copyright while selling licenses to third

parties

Brokerage fees

derives from an intermediation services performed on behalf of

two or more parties

Advertising

Fees for advertising a particular product, service or brand form the basis of this Revenue Stream.

Financial Statement • If you have shareholders, they need to know how

you are doing and financial statements are the cleanest way to show your progress.

• If you are looking for investors, they will want to look at your financial statements to assess the viability of investing in your company.

Assumptions

Example

Break-Even point"At what level of sales will my company make a

profit?"

Conclusion