The venture design process Business Model Defined



Download 7,6 Kb.
Date conversion28.06.2017
Size7,6 Kb.

Business Model Analysis

  • Professor Glenn A. Okun
  • NYU Stern School of Business
  • gokun@stern.nyu.edu

The venture design process

Business Model Defined

  • The business model is the manager’s logic that will allow a venture to:
    • Capture the market opportunity;
    • Mitigate risks;
    • Identify the required resource set; and
    • Create value for investors and founders.

Business Models v. Business Strategy

  • The business model bridges idea and action.
  • It answers the question of why a venture will be viable and valuable.
  • Business models relate to business strategy as logic relates to the algorithm.

Business Models v. Business Plans

  • The business model is not burdened with the “how” questions.
  • These are resolved by the strategic plan.

Business Model Formation

  • Business models are formed through a process of addressing a series of questions:
    • What is the value proposition?
    • What are the target markets?
    • Who are the critical members of the team?
    • Where does competitive advantage exist?
    • Why is there a competitive advantage?
    • When will development, launch and cash flow breakeven occur?

From Business Model to Financial Model

  • Value
  • Proposition
  • Team
  • Advantage
  • Financial
  • Implications
  • Analysis
  • Core Competency
  • Internal & External Analysis
  • Pro Forma Analysis
  • Data
  • Price
  • Units
  • Timing
  • Expenses
  • Expenses
  • Capital Budgeting & Cash Flow Assumptions
  • Conclusions
  • Risk (k)
  • Risk (k)
  • Risk (k)
  • Viability & Value
  • (RAROC)

Business Model Analysis

  • Facets of analysis
    • Revenues
      • Cash flows and their timing
      • Revenue drivers
    • Expenses
      • Cash flows and their timing
    • Investment required through cash flow breakeven
      • Working capital
    • Maximum financing required and cash flow breakeven timing
    • Sensitivity analysis
      • Key success factors

Revenue Analysis

  • Sources
    • Single stream
    • Multiple stream
    • Interdependent
    • Loss leader
  • Models
    • Subscription/membership
    • Unit based
    • Advertising
    • Licensing
    • Transaction fee

Expense Analysis

  • Cost structures
    • Payroll
      • Direct
      • Indirect
    • Inventory
    • Location
    • Marketing
  • Cost drivers

Investment Analysis

Success Factor Analysis

  • Identify the business factors with the greatest impact on the cash flows
    • An anticipatory business scorecard

Building a Financial Plan

  • Sales forecast
  • Cost forecast
    • Costs of operating and costs per sale
  • Income statement and balance sheet
    • a/r, a/p
  • Cash flow forecast
  • Summary statement of sources & uses of cash

Cash Budgeting

Sales forecast

  • Three scenario approach (results in three cash budgets)
    • Optimistic
    • Realistic
    • Pessimistic

Cash receipts forecast

  • Cash budget must account for delays between sales and collections (including write-offs)

Cash disbursements forecast

  • Record disbursements in the month of payment, not when the obligation is incurred

Building a Financial Plan

  • Sales forecast
    • Two to three years
    • Detailed assumptions
      • Sales per customer
      • Number of customers
      • Sales growth rate
  • Cost forecast
    • Costs of operating and costs per sale
  • Income statement and balance sheet
    • a/r, a/p
  • Cash flow forecast
  • Summary statement of sources & uses of cash

Cash Flow Calculation

  • Net income
  • + depreciation
  • working capital from operations
  • - net increase in current assets
  • + net increase in current liabilities
  • cash flow from operations
  • - net increase in gross fixed assets
  • + net increase in debt & equity invested
  • - dividends paid
  • net cash flow
  • + beginning cash balance
  • - required ending cash balance
  • net cash surplus or borrowing required

Okun’s Law

  • Never do anything that is not fun at least 80% of the time!


The database is protected by copyright ©sckool.org 2016
send message

    Main page