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Building a business model

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Erik Vanhauwaert
Erik Vanhauwaert

Describes the concepts of a Value Network, the Osterwalder Canvas Model and the absolute basics of a financial plan in order to build a viable business model

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A passionatetalk on building a business modelLightbulb Sessions II - Erik Vanhauwaert
New business / product / service- Is this a profitable venture?????????Can I make money with this?
DefinitionBusiness ModelLinked to a (set of) products/services! Business StrategyLong term, broader scope Business PlanImplementation plan with financial evaluation describes how one creates, delivers and capturesvalue
Road guide to the money question3 frameworks that dont give you answers, but that let you ask the right questions.i. Value Network
Value NetworkAn eco-system of actors, which perform roles and who interact with others.Use:Identify all rolesIdentify possible actorsMap actors on rolesIndicate required interactions
Value NetworkGoal:Think about different configurationsAre all roles fulfilled by a happy actor?Example 1: the anvilFinds resourcesBuilds anvilsGets paidGets anvilPaysDeliveryCreate Buy & usePaymentInstructionsCompany XBlacksmiths
Value NetworkExample 2:WebCo designs a site for clients to sell their products online, for a margin on the sales.Create site Buy productWebCoConsumersPaymentDeliveryProduct infoMargin shareHandle salesProvide productCompany X
Road guide to the money questionii. Canvas Model (sterwalder)i. Value Network
Business Model CanvasWhat?How?Who?$?
Business Model CanvasPrice?Performance?Design?Newness?Product OfferorValue PropositionHow?Who?$?
Business Model CanvasMass Market?Segmented?Multi-sided?Diversified?Product OfferHow?CustomerSegments$?
Business Model CanvasAwarenessEvaluationPurchaseDeliveryAfter-saleProduct OfferHow?CustomerSegmentsDistributionChannel$?
Business Model CanvasCRMSelf-service?Personal assistance?Community?Product OfferHow?CustomerSegmentsDistributionChannel$?
Business Model CanvasCRMProduct OfferHow?Sale?Pay per use?Lease?License?CustomerSegmentsDistributionChannelRevenueStreams
Business Model CanvasPhysicalHumanIntellectualFinancialCRMProduct OfferCustomerSegmentsKeyResourcesDistributionChannelRevenueStreams
Business Model CanvasCRMProductionProblem SolvingPlatform or networkProduct OfferKeyActivitiesCustomerSegmentsKeyResourcesDistributionChannelRevenueStreams
Business Model CanvasResourcesRisk reductionEconomy of scaleCRMProduct OfferKeyActivitiesKey PartnersCustomerSegmentsKeyResourcesDistributionChannelRevenueStreams
Business Model CanvasCRMProduct OfferCost vs. value drivenFixed vs. variableEconomies of scale & scopeKeyActivitiesKey PartnersCustomerSegmentsKeyResourcesDistributionChannelRevenueStreamsCost Structure
Business Model CanvasDetail of one actor in the Value NetworkCRMProduct OfferKeyActivitiesKey PartnersCustomerSegmentsKeyResourcesDistributionChannelRevenueStreamsCost Structure
Example: AppleCustomerSegmentsCRMKeyActivitiesKey PartnersProduct OfferLovemarkHW & SW designRecord companiesSeamless music experienceSwitching costsMarketingMass marketOEMsDistributionChannelKeyResourcesApple brandPeopleapple.comiPod hardwareRetail storesContent and agreementsiTunes storeiTunesRevenueStreamsCost StructureLarge hardware revenuesSome music revenuesPeopleMarketingManufacturing
Road guide to the money questioniii. Business Planii. Canvas Modeli. Value Network
Business PlanInternal planning + financial evaluation of Business ModelCRMProduct OfferKeyActivitiesKey PartnersCustomerSegmentsKeyResourcesDistributionChannelRevenueStreamsCost Structure
Business PlanVISIONWhat is the goal of the business?STRATEGYHow will you reach it?OperationsLegalMarketingHuman ResourcesFinancialPLANNINGPlan of action, based on assumptions & estimates
Financial Business Plan- CostsServe to create your product and sell your product minimize costs+ Revenues= price * amount sold optimize price= Profit (loss)What is earned from the product maximize profit
Financial / AccountingCompany A:Creates anvils monthly for $1.000 and sells them for $800Has $10.000 in cash and is debt-free.Company BCreates anvils monthly for $1.000 and sells them for $1.200Has $5.000 in cash, but has a debt of $10.000 that expires next yearWhich company do you invest in?
Financial / AccountingCompany A:Creates anvils monthly for $1.000 and sells them for $800Has $10.000 in cash and is debt-free.Next year: $10.000 - $12.000 + $9.600 = $7.600 of cashCompany BCreates anvils monthly for $1.000 and sells them for $1.200Has $5.000 in cash, but has a debt of $10.000 that expires next yearNext year: $5.000 - $12.000 - $10.000 + $14.400 = - $2.600 of cashThe bank may force bankruptcy on company B and seize its assets.
CASH = KINGProfit vs CashProfit = accounting termCosts & revenues are recognized on a specific date, which may not be the actual data of cash exchange!Kosten & opbrengsten vs. uitgaven & inkomstenE.g. I sell a car today= recognized revenue of 20.000EUR today Actual payment could be 2 months from now
Making a profit while losing cashProcess:Buy raw materials = cash outProcess materials into product = cash outStore finished goods = cash outSale contract = official income realized (profit)Cash payment possibly 1-3 months later = cash inSpecifically in times of rapid growthFirst three steps continuously demand more cashEach product sold at a profit, but still a cash drain
Cash Flow ModelPart 1: AssumptionsEstimates of all costsEstimate of consumer priceEstimate of # goods sold (monthly, quarterly,)
Estimate costs what costs?Several phases in launching a product/serviceCompany start-up? Legal requirement & costsPlanning: decide what/how/when to actDesign & implementation: preparationsOperational phase: produce, sell & provide support Dont forget to take all of these into account
RevenuesFirst test: Break-even analysisRevenuesTotal costVariablee.g. raw materialsFixede.g. rentBreak-even# products produced & sold
Timing issueTime = money, literally$1.000 today = $1.050 next year (5% interest rate)$1.000 next year = $952 todayIdeally, we have a more detailed model of incoming and outgoing money use a spreadsheetValuet+n = Valuet * (1+rate)n
Cash Flow ModelPart 1: AssumptionsEstimates of all costsEstimate of consumer priceEstimate of # goods sold (monthly, quarterly,)Part 2: Time chartA row for each type of cost/revenueProduction saleSale immediate cash input
Example resultPayback periodHow much money do I need to have/loan
Scenario analysis : e.g. price -25%
Conclusioniii. Business Planii. Canvas Modeli. Value NetworkHow will I organize myself?How do I earn / spend money?
Conclusioniii. Business PlanWho could/should be involved?What do they do?ii. Canvas Modeli. Value Network
Conclusioniii. Business Planii. Canvas ModelHow much do I need to sell at what price to become profitable?i. Value Network

More Related Content

Building a business model

  • 1. A passionatetalk on building a business modelLightbulb Sessions II - Erik Vanhauwaert
  • 2. New business / product / service- Is this a profitable venture?????????Can I make money with this?
  • 3. DefinitionBusiness ModelLinked to a (set of) products/services! Business StrategyLong term, broader scope Business PlanImplementation plan with financial evaluation describes how one creates, delivers and capturesvalue
  • 4. Road guide to the money question3 frameworks that dont give you answers, but that let you ask the right questions.i. Value Network
  • 5. Value NetworkAn eco-system of actors, which perform roles and who interact with others.Use:Identify all rolesIdentify possible actorsMap actors on rolesIndicate required interactions
  • 6. Value NetworkGoal:Think about different configurationsAre all roles fulfilled by a happy actor?Example 1: the anvilFinds resourcesBuilds anvilsGets paidGets anvilPaysDeliveryCreate Buy & usePaymentInstructionsCompany XBlacksmiths
  • 7. Value NetworkExample 2:WebCo designs a site for clients to sell their products online, for a margin on the sales.Create site Buy productWebCoConsumersPaymentDeliveryProduct infoMargin shareHandle salesProvide productCompany X
  • 8. Road guide to the money questionii. Canvas Model (sterwalder)i. Value Network
  • 11. Business Model CanvasMass Market?Segmented?Multi-sided?Diversified?Product OfferHow?CustomerSegments$?
  • 12. Business Model CanvasAwarenessEvaluationPurchaseDeliveryAfter-saleProduct OfferHow?CustomerSegmentsDistributionChannel$?
  • 13. Business Model CanvasCRMSelf-service?Personal assistance?Community?Product OfferHow?CustomerSegmentsDistributionChannel$?
  • 14. Business Model CanvasCRMProduct OfferHow?Sale?Pay per use?Lease?License?CustomerSegmentsDistributionChannelRevenueStreams
  • 15. Business Model CanvasPhysicalHumanIntellectualFinancialCRMProduct OfferCustomerSegmentsKeyResourcesDistributionChannelRevenueStreams
  • 16. Business Model CanvasCRMProductionProblem SolvingPlatform or networkProduct OfferKeyActivitiesCustomerSegmentsKeyResourcesDistributionChannelRevenueStreams
  • 17. Business Model CanvasResourcesRisk reductionEconomy of scaleCRMProduct OfferKeyActivitiesKey PartnersCustomerSegmentsKeyResourcesDistributionChannelRevenueStreams
  • 18. Business Model CanvasCRMProduct OfferCost vs. value drivenFixed vs. variableEconomies of scale & scopeKeyActivitiesKey PartnersCustomerSegmentsKeyResourcesDistributionChannelRevenueStreamsCost Structure
  • 19. Business Model CanvasDetail of one actor in the Value NetworkCRMProduct OfferKeyActivitiesKey PartnersCustomerSegmentsKeyResourcesDistributionChannelRevenueStreamsCost Structure
  • 20. Example: AppleCustomerSegmentsCRMKeyActivitiesKey PartnersProduct OfferLovemarkHW & SW designRecord companiesSeamless music experienceSwitching costsMarketingMass marketOEMsDistributionChannelKeyResourcesApple brandPeopleapple.comiPod hardwareRetail storesContent and agreementsiTunes storeiTunesRevenueStreamsCost StructureLarge hardware revenuesSome music revenuesPeopleMarketingManufacturing
  • 21. Road guide to the money questioniii. Business Planii. Canvas Modeli. Value Network
  • 22. Business PlanInternal planning + financial evaluation of Business ModelCRMProduct OfferKeyActivitiesKey PartnersCustomerSegmentsKeyResourcesDistributionChannelRevenueStreamsCost Structure
  • 23. Business PlanVISIONWhat is the goal of the business?STRATEGYHow will you reach it?OperationsLegalMarketingHuman ResourcesFinancialPLANNINGPlan of action, based on assumptions & estimates
  • 24. Financial Business Plan- CostsServe to create your product and sell your product minimize costs+ Revenues= price * amount sold optimize price= Profit (loss)What is earned from the product maximize profit
  • 25. Financial / AccountingCompany A:Creates anvils monthly for $1.000 and sells them for $800Has $10.000 in cash and is debt-free.Company BCreates anvils monthly for $1.000 and sells them for $1.200Has $5.000 in cash, but has a debt of $10.000 that expires next yearWhich company do you invest in?
  • 26. Financial / AccountingCompany A:Creates anvils monthly for $1.000 and sells them for $800Has $10.000 in cash and is debt-free.Next year: $10.000 - $12.000 + $9.600 = $7.600 of cashCompany BCreates anvils monthly for $1.000 and sells them for $1.200Has $5.000 in cash, but has a debt of $10.000 that expires next yearNext year: $5.000 - $12.000 - $10.000 + $14.400 = - $2.600 of cashThe bank may force bankruptcy on company B and seize its assets.
  • 27. CASH = KINGProfit vs CashProfit = accounting termCosts & revenues are recognized on a specific date, which may not be the actual data of cash exchange!Kosten & opbrengsten vs. uitgaven & inkomstenE.g. I sell a car today= recognized revenue of 20.000EUR today Actual payment could be 2 months from now
  • 28. Making a profit while losing cashProcess:Buy raw materials = cash outProcess materials into product = cash outStore finished goods = cash outSale contract = official income realized (profit)Cash payment possibly 1-3 months later = cash inSpecifically in times of rapid growthFirst three steps continuously demand more cashEach product sold at a profit, but still a cash drain
  • 29. Cash Flow ModelPart 1: AssumptionsEstimates of all costsEstimate of consumer priceEstimate of # goods sold (monthly, quarterly,)
  • 30. Estimate costs what costs?Several phases in launching a product/serviceCompany start-up? Legal requirement & costsPlanning: decide what/how/when to actDesign & implementation: preparationsOperational phase: produce, sell & provide support Dont forget to take all of these into account
  • 31. RevenuesFirst test: Break-even analysisRevenuesTotal costVariablee.g. raw materialsFixede.g. rentBreak-even# products produced & sold
  • 32. Timing issueTime = money, literally$1.000 today = $1.050 next year (5% interest rate)$1.000 next year = $952 todayIdeally, we have a more detailed model of incoming and outgoing money use a spreadsheetValuet+n = Valuet * (1+rate)n
  • 33. Cash Flow ModelPart 1: AssumptionsEstimates of all costsEstimate of consumer priceEstimate of # goods sold (monthly, quarterly,)Part 2: Time chartA row for each type of cost/revenueProduction saleSale immediate cash input
  • 34. Example resultPayback periodHow much money do I need to have/loan
  • 35. Scenario analysis : e.g. price -25%
  • 36. Conclusioniii. Business Planii. Canvas Modeli. Value NetworkHow will I organize myself?How do I earn / spend money?
  • 37. Conclusioniii. Business PlanWho could/should be involved?What do they do?ii. Canvas Modeli. Value Network
  • 38. Conclusioniii. Business Planii. Canvas ModelHow much do I need to sell at what price to become profitable?i. Value Network
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