Entrepreneur

1. Entrepreneurship
Development
MODULE 3 – DEVELOPING A BUSINESS MODEL
CO3 –CRAFT A BUSINESS PLAN FOR THE GENERATED IDEA
BASED ON VALID BUSINESS MODEL AND INCORPORATING
TECHNICAL, ECONOMICAL, FINANCIAL AND MARKETING
FEASIBILITY.

2. That process
Awareness
Idea
Business
Plan
Start up
Growth

3. What are we going to learn:
Module 3 Exploring Business Opportunity
Business Model - common types of business models.
Business Plan – Preparation - CADL
Product/ Market Fit – unit economics, cost and profitability, Refining the product/service,
Establish the success and operational matrix.
Customer Validation - Efficiency with which customers can be captured and kept, cost of
customer acquisition

5. Business Model
A business model is an outline of how a company plans to make money.
A business model is a company's core strategy for profitably doing business.
Models generally include information like products or services the business plans to sell, target
markets, and any anticipated expenses
A business model is an outline of how a company plans to make money with its product and
customer base in a specific market. At its core, a business model explains four things:
• What product or service a company will sell.
• How it intends to market that product or service.
• What kind of expenses it will face.
• How it expects to turn a profit.

6. Business Model – Example (NETFLIX)
One popular
example of a
business model
is the
subscription
model — in
which
businesses
charge a
subscription fee
(monthly,
annually, etc.) for
customers to
access a service.
What kind of product or service a company will sell: Netflix sells an online streaming
service.
How it intends to market that product or service: Netflix uses a multichannel
marketing strategy and markets its service through social media, email marketing,
advertising and even simple word-of-mouth marketing.
What kind of expenses it will face: As a Fortune 500 company, Netflix's expenses are
extensive, but perhaps notably, its expenses will include the costs to produce or acquire
the content on its platform, as well as the technology and staff needed to maintain the
service.
How it expects to turn a profit: Even though Netflix is such a large enterprise, (and has a
few different ways of making money) when it comes down to it, it expects to earn a profit
from its subscription sales.

7. Business Model types
1. Subscription model: A subscription business model can be applied to both traditional brick-and-
mortar businesses and online businesses alike. Essentially, as we explained in reference to Netflix,
the customer pays a recurring payment on a monthly basis (or another specified timeframe) for
access to a service or product. E.g. HelloFresh, Beer Cartel, as well as other streaming services like
Hulu, HBO Go, and Disney+, Sensibull
2. Bundling model: Exactly like it sounds, the bundling business model involves companies selling
two or more products together as a single unit, often for a lower price than they would charge
selling the products separately. This type of business model allows companies to generate a greater
volume of sales and perhaps market products or services that are more difficult to sell. E.g. Adobe
Creative suite, Burger king etc.

8. Business Model types
3. Freemium model: The freemium business model has gained popularity with the prevalence of
online and Software-as-a-Service (SaaS) businesses. The basic framework goes like this: a software
company hosts and provides a proprietary tool for their users to freely access, such as an app or
tool suite. However, the company withholds or limits the use of certain key features that, over time,
their users will likely want to use more regularly. To gain access to those key features, users must
pay for a subscription. E.g. Spotify, Games, Sensibull etc.
4. Razor Blade model: A classic example of this model is Apple iPhones and Macs — you purchase
the high-margin item, the phone or computer, and then Apple pushes additional products, tools, and
services that accompany that item. E.g. Nintendo, X-Box, HP printer & cartridge
5. Product to service model: The customer will be able to purchase a result than a product. E.g. Uber,
Ola, Zoom car etc.

9. Business Model types
6. Crowd Sourcing model: Crowdsourcing involves receiving opinions, information, or work from
many different people using the internet or social media. These types of business models allow
companies to tap into a vast network of talent without having to hire in-house employees. E.g.
YouTube, Wikipedia, IMDB etc.
7. Franchise model: A franchise is an established business blueprint that is simply purchased and
reproduced by the buyer, the franchisee. The franchiser, or original owner, works with the
franchisee to help them with financing, marketing, and other business operations to ensure the
business functions as it should. In return, the franchisee pays the franchiser a percentage of the
profit. E.g. Star Bucks, Domino’s, Subway etc.
8. Manufacturer model & Retailer model

10. Business plan
A business plan is a written document that describes in detail how a business—usually a
startup—defines its objectives and how it is to go about achieving its goals.
A business plan lays out a written roadmap for the firm from marketing, financial, and
operational standpoints.
For instance, a business plan is used to attract investment before a company has
established a proven track record or to secure lending. They are also a good way for
companies' executive teams to be on the same page about strategic action items and to
keep themselves on target towards the set goals.

11. Business plan - Purposes
Purpose of Business plan
• Describe the feasibility of the project
• To act as a blue print of the company
• Introducing business to various stakeholders
• Strategic reflection of business
• Management & Operating plans
• Act as internal road map
• Creating and maintaining customers

12. Business plan - Contents
Title Page
Executive Summary
Industry Overview
Market Analysis & Competition
Sales & Marketing Plan
Management Plan
Operating Plan
Financial Plan
Appendices & Exhibits

13. Business plan - Contents
Title Page Executive Summary
Company’s mission & Vision
Describe products / services
Summary of Target market &
demographics
Summary of operational
plan, labor & equipment
requirements
Industry Overview
Describe company’s position
in industry
Existing competition &
major players
Industry trends &
government influences
Market Analysis &
Competition
Target market, Needs,
Geographical location
Size of market
Estimated sales volume
Strategies to combat
competition

14. Business plan - Contents
Sales & Marketing
Plan
Products for selling &
USP
Advertising platforms
to be used
Pricing of product
Distribution method
Management Plan
Describe organization
structure
Owners & ownership
percentage
Key executives, role &
remuneration
Professionals to be
hired

15. Business plan - Contents
Operating Plan
Location of business –
Office & warehouse
Labor requirements –
Roles / Skills etc.
Manufacturing process
Equipment details,
Raw materials etc.
Financial Plan –
Projections – Income
statement, Cashflow
statement, Balance sheet
Appendices & Exhibits
Quotes of buildings
and machinery lease
Office and warehouse
plan
Market research
summary
Credit information
about owners
List of product /
services

16. Learning Outcomes of BPR
•LO1: Able to prepare a business plan report of minimum contents
•LO2: To use and familiarize with MS word and its features
•LO3: To analyse industrial factors

17. Flagship Activity – Preparation of B
Plan
The score is out of 100. Major component of CARS
You are going to prepare a plagiarism free business plan report
Choose a business from any industry that is relevant and specific
Choose a company and name it
Create a business plan for the company with the components which we discussed
Individual activity
Thinking time for business idea
Next two to three sessions, we’ll be spending in computer lab

18. Points
awarded
Criteria
20
Overall Organization
Materials presented in clear, logical order; written
proposal
neat, organized & well written
50
Business Plan Content
All components present and properly addressed:
Executive Summary, Business Description, Mission &
Vision Statement, Competitive Analysis & Industry
Product Development, Management
plan, Marketing plan, Financial plan;
10
Marketability
There is a clear statement of the need of the product /
service in the market
20
Financials
Clear, concise presentation of amount, timing, type and
use of funds required.
Sales Plan, HR Plan, Financial
Assumptions, Cash requirements & sources of funds

19. Product / Market Fit
What is it?
A scenario in which a
company’s target
customers are buying,
using, and telling others
about the company’s
product in numbers
large enough to sustain
that product’s growth and
profitability
Core of it
Product-market fit means
finding a good market
with a product capable
of satisfying that market.
Happening
It happens when you have
successfully identified
your target customer
and are serving them
with the right product.
What
next?
After achieving product
market fit, the next step is
to scale by finding more
customers within your
target market through
research (user feedback
and interviews).

20. Product / Market Fit - Pyramid

21. Measuring Product / Market Fit
How quickly do customers make up their minds about a purchase?
Are reviewers mentioning your product to family, friends, or social media connections?
What is your customer retention rate?
Are customers interacting with your marketing efforts?
How many customers have unsubscribed or stopped using your product?

22. Unit Economics – Cost & Profitability
Unit economics, in simple words, are the direct costs and revenues associated with a business model on
a per-unit basis. A unit refers to any quantifiable item that creates value for a business.
Why Unit Economics?
Forecast Profits - It produces a simple, granular picture of your company’s profitability on a per-unit
basis.
Optimization of product – It suggest whether it’s overpriced or undervalued.
Assess market sustainability – It helps to evaluate a product’s future potential

23. Activity – Prove with evidence
The following are 3 companies who proved success in India. It is due to the perfect blend of Product /
Market fit:
1. Royal Enfield
2. Career 360
3. Xiaomi Mi
You are required to read the article (link provided to Mr. Ashish) and analyze what were the factors
affected the successful launch and customer retention with these companies focusing on
PRODUCT/MARKET fit aspect. Then a Random GD
(Hint – You can use Product/Market fit pyramid)

25. Unit Economics – Calculation & analysis
Method 1: Define Unit as “One Item Sold”
If a unit is defined as “one item sold,” then you can determine unit economics by calculating
the contribution. Contribution = price per unit – variable costs per sale
Method 2: Define Unit as “One Customer"
Using ratio of two different metrics:
Customer lifetime value (LTV): how much money a business receives from a given customer
before the customer “churns” or stops doing business with the company
Customer acquisition cost (CAC): the cost of attracting a client
Unit Economics = customer lifetime value divided by customer acquisition cost
(UE = LTV/CAC)

26. Calculation
Customer Life Time Value = Customer value X Average customer lifespan
Customer value = Average Purchase value X Average purchase frequency
Average purchase value = Total revenue / No. of orders
Average purchase frequency = Total No. of purchases / No. of customers
Customer Acquisition cost = Total sales & marketing expenses / New customers acquired

27. Calculate CLTV & CAC
Starbucks Ltd. Provides you with the following information:
 Total revenue for the period = $ 1,05,000
 Number of orders during the period = 13125
 Total number of purchases = 17400
 Total number of customers = 9760
 Average lifespan of customer = 2 years
 Marketing campaign expenses = $ 66,330
 New customers acquired during the period = 4120

28. Calculate CLTV & CAC
Heineken Ltd. Provides the following:
 Average Purchase value = $ 9.5
 Total number of purchases = 95950
 Total number of customers = 13380
 Average lifespan of customer = 5 years
 Marketing campaign expenses = $ 1,42,450
 New customers acquired during the period = 3000

29. Success Metrics & Operational Metrics
Metrics means a measure to find out something
A business success metric or operational metric is a quantifiable
measurement that business leaders track to see if their strategies are
working effectively.
Success metrics are also known as key performance indicators (KPIs).
There is no one-size-fits-all success metric; most teams use several
different metrics to determine success.

30. Success Metrics & Operational Metrics
Gross profit margin: Gross profit margin is measured by subtracting the cost of goods sold from the
company's net sales.
Return on investment (ROI): The ratio between the income and investment. ROI is commonly used to
decide whether or not an initiative is worth investing time or money into. When used as a business metric, it
often tracks how well an investment is performing.
Productivity: This is the measurement of how efficiently your company is producing goods or services. You
can calculate this by dividing the total output by the total input.
Total number of customers: A simple but effective metric to track. The more paid customers, the more
money earned for the business.
Recurring revenue: Commonly used by SaaS companies, this is the amount of revenue generated by all of
your current active subscribers during a specific period. It's commonly measured either monthly or
annually.

31. Success Metrics & Operational Metrics
Marketing
metrics
Daily web traffic users: This is the number of users that visit your website daily.
New web traffic users: This is the number of users that visit your website who have
never visited your website before.
Email open rates: This metric is particularly important for email marketing teams. Email
open rates measure the percentage of your audience who has opened your marketing
email.
Sales
metrics
Lead to customer conversion rates: If the conversion rate is high, you're targeting the
right audience and your team is focusing on the right priorities.
Customer acquisition cost: This is how much your team spends on both marketing and sales
strategies to convert a lead into a customer. Ideally, you want this number to be as close to
zero as possible.
Total new customers: Tracking this metric can give you an indicator on how quickly your
customer base is growing.

32. Success Metrics & Operational Metrics
Customer
success
matrix
Customer retention rate: This metric measures how many of your customers remain
customers over a set period of time. It's up to your team to determine what timeframe
makes sense for your business and industry.
Customer churn rate: This is the opposite of the retention rate. Customer churn rate
measures how often your customers stop doing business with your company. It's up to
your team to determine what period of time makes the most sense for your business and
industry.
Customer feedback: While not a quantitative measure, anecdotal customer feedback can
be extremely valuable to your company and can be used for testimonials and marketing
strategy.
Average customer lifetime: This is the average length in which a customer stays your
customer. This metric is used to calculate customer lifetime value.
Customer lifetime value (CLV or LTV): This is the amount of profit a company expects to
earn from a specific customer over the average lifetime of a customer relationship.

33. Customer validation
Much required
process before scaling
up the business
What is it?
A method that allows
entrepreneurs to develop a
predictable sales process
Important?
Entrepreneurs should not
scale the business until they
have developed a solid
understanding of a
repeatable sales process.

34. Customer validation - Process
Phase 1 of customer validation: Preparing to sell
This first phase is about using the insights generated in the customer
discovery process, starting with value proposition. Make sure you prepare:
• Any sales materials required in order to present to customers, including website, price lists,
product data sheet and customer presentation
• A preliminary list of marketing material
• A preliminary channel strategy
• A preliminary sales road map based on information learned during the customer discovery
process
• An agreement between your product development and customer development teams on
product features and the progress plan

35. Customer validation - Process
Phase 2: Selling to visionaries
The purpose of this phase is to land a handful of deals that validate the value proposition and sales
road map. It is important to bear in mind that just a few deals will provide sufficient validation at this
stage. Regard any failures as an opportunity to learn more and improve the process.
Phase 3: Determining positioning
The validation achieved in phase 2 will provide you with information that can be used to develop
your positioning statement. Test your positioning statement on industry insiders for comments and
constructive criticism.

36. Customer validation - Process
Phase 4: Verifying validation process
As in the customer discovery process, the final phase in the customer
validation process is designed to incorporate learning from the first three
phases and have you examine the progress made so far. The main question
to answer at this point is the extent to which you achieved your objectives
for customer validation. The following will help you gauge your response:
• Did you sell enough to validate your value proposition?
• Have you identified a profitable and sustainable sales and business model?
• Did you develop sufficient insights to scale your business?

37. Customer validation – Process - Xiaomi
Phase 1 of customer validation: Preparing to sell
• Website launch, Press Release, Advertisements
• Online only – Flash sale concept
• A preliminary sales road map based on information learned
during the customer discovery process
• An agreement between your product development and customer
development teams on product features and the progress plan

38. Customer validation - Process - Xiaomi
Phase 2: Selling to visionaries
Selling / Providing it to reviewers, YouTube & Google
reviewers
Phase 3: Determining positioning
Cost leadership & Quality. Value for Money

39. Customer validation - Process - Xiaomi
Phase 4: Verifying validation process
• Did you sell enough to validate your value proposition? - YES
• Have you identified a profitable and sustainable sales and business model? - YES
• Did you develop sufficient insights to scale your business? - YES

40. Ted X Talk – Watch > Synthesize >
Summarize
Mark Leruste – CEO – Ministry of Purpose
Motivational trainer focusing on:
◦ Finding meaning and purpose at work
◦ Building purpose-driven organization
◦ Unleashing millennials in workplace
https://www.youtube.com/watch?v=f6nxcfbDfZo