Developing a Viable Business Model Patrick Barry

Agenda Ø Overview Ø Aligning with Objectives Ø Elements of a Viable Business Model Ø Process of Building Viable Plan Ø Wrap-Up 2

Viable Business Model Ø A sound and compelling Business Plan should include: – – – – Assessment of Market Identification of Customer Segments Description of Key Buyer Values Assessment of strengths & weaknesses of Competitive Alternatives Clear Distribution Strategy Assessment of Risks 5 year Financial Pro-formas including Cash Flow Model, Income Statement, and Balance Sheet – Detailed Description of Management Team – Clear Exit Strategy with Potential buyers identified 3

Viable Business Model Ø A sound and compelling Business Plan should include: – – – – Assessment of Market Identification of Customer Segments Description of Key Buyer Values Assessment of strengths & weaknesses of Competitive Alternatives Clear Distribution Strategy Assessment of Risks 5 year Financial Pro-formas including Cash Flow Model, Income Statement, and Balance Sheet – Detailed Description of Management Team – Clear Exit Strategy with Potential buyers identified Ø A Story that makes sense 4

Align Business Model with Objectives Ø What are you trying to accomplish with this plan? – Win the Competition? – Pass a Class? – Start a Business? • Make a living? • Fame & Fortune? • Make a difference? – Learn? 5

Key Misconception(s) Ø Invention = Innovation Ø Good Plan = Winning Plan = Good Business Model = Successful Business Ø Good Business Model = Big $ Ø A Plan = The Answer 6

A Compelling Story needs to cover the key elements … Sustainability Market Need Alternatives Product / Service Delivery & Execution ‘Go to Market’ Strategy Financing & Capital Needs Management Team Plan to Scale & Leverage Exit Plan Financial Projections 7

… And it needs to fit together logically Market Need Sustainability Alternatives Product / Service Delivery & Execution ‘Go to Market’ Strategy Financing & Capital Needs Management Team Plan to Scale & Leverage Exit Plan Financial Projections 8

Key Element: Defining Market Need Ø Begin with the need not the product or service Economic Buyers Your Business End. Users Distribution Channels Influencers 9

Key Element: Alternatives Ø How is need being satisfied or addressed today 10

Key Element: Meeting Needs Ø How will your product / service meet identified needs? Ø Why it is better than alternatives from the customer’s perspective? Ø What will compel them to buy? 11

Key Element: Go to Market Ø Is there alignment with the other elements? Ø Why is the plan (the distribution channel, the marketing plan, the sales message, etc. ) the best / most logical? 12

Key Element: Identifying Critical Factors Ø Which aspects of the business are most critical? Ø Which aspects need to be done well and which ones exceptionally well? Ø Which aspects, if done marginally, could sink the business? 13

Key Element: Management Ø What talent / expertise is needed to meet critical needs of business? Ø How will you attract that talent? Ø Begin with needs and align talent with it – Don’t start with people available 14

Key Element: How will it make $ Ø Who pays what and why? – Specific customer groups – Sell price - why reasonable? – Volume • Initial, Ramp up rate, Reasonable potential Ø Cost Structure – – – COGS Gross Profit ($ & %) Distribution Costs Marketing Costs Support Costs Net Potential 15

Process: How to Build a Viable Plan Ø Onion Method Ø Check & Recheck Connections Ø Versions: – 2 minutes – 20 minutes – 2 hours 16

Process: How to Build a Viable Plan Tips & Tactics (Top 10 List) 10. Talk to yourself 9. Be an actor 8. Make sure the numbers add 7. Answer the question: “How do I know …? ” 6. Answer the question: “How would I find out? ” 5. Get testimonials / references from those in the know 4. Sell one (or more) 3. Realize the product / service is only relevant through the market’s eyes 2. Define the Bet 1. Constantly learn and adjust 17

Wrap - Up Ø Tell a logical story => the rest is logistics and risk / reward assessments 18

Wrap - Up Ø Observations & Questions 19