Customer Development & Acquisition -Bryan Jurewicz
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This is the 1/27/14 Customer Development & Acquisition keynote presentation Bryan Jurewicz delivered to the Wisconsin Alumni Research Foundation (WARF) Entrepreneurons Startup Educational Series. This ...

This is the 1/27/14 Customer Development & Acquisition keynote presentation Bryan Jurewicz delivered to the Wisconsin Alumni Research Foundation (WARF) Entrepreneurons Startup Educational Series. This deck provides a detailed introduction to lean startup business methodologies/metrics/goals for building, growing & funding an early stage venture.

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Customer Development & Acquisition -Bryan Jurewicz Customer Development & Acquisition -Bryan Jurewicz Presentation Transcript

  • Bryan Jurewicz Entrepreneur/Executive/Advisor Accelerating Growth, Funding & Exits Bryan Jurewicz @BryanJurewicz
  • Experience  CEO - GradeBeam.com Construction Communication Network  Database/Qualifications/Documents/Messaging/Bidding  500,000+ Construction Firms & Millions of Monthly Transactions  GradeBeam.com Acquired By Textura 2011 & IPO 2013 (NYSE:TXTR)  Partner - LeanTech Group  Maximizing Valuations, Funding, Mergers & Acquisitions  CEO - ROI Magnet  Strategic Growth Consulting & Outsourced Executive Leadership  Mentor - 1871  CEO Mentor – Junto Institute For Entrepreneurial Leadership Bryan Jurewicz 2
  • Badger Pride  Graduated UW ‘97  Studied Engineering & Business  4 Year Football Starter  Academic All American  Helped Barry Alvarez Build Success    Rose Bowl ‘94 Hall of Fame Bowl ‘95 Copper Bowl ‘97 Bryan Jurewicz 3
  • Lean Startup Revolution  Business Plans Are Dead (Use Business Model Canvas)  Steps Before Building Product, Team & Expenses: 1. Be Laser Focused On Problem & Solution! 2. Who Is Customer? 3. Narrow Value Proposition (Don’t Be Everything For Everyone) 4. Create Future Valuation Hypothesis & Work Backward (Target Market x Small % x $Revenue x Valuation Multiple) 5. Build Business Model Canvas 6. Build Financial Projections 7. Estimate Funding Needed 8. Determine Future Ownership %, Potential Valuation & Exit Opportunities 9. Begin Customer Development 10. Iterate/Test/Iterate/Test 11. Pivot? 12. Begin Building Business Bryan Jurewicz 4
  • Steve Blank’s Customer Development Alexander Osterwalder's Canvas Bryan Jurewicz 5
  • Physical vs Digital Businesses  From Ted Feierstein’s Entrepreneuron presentation:  National Science Foundation exploring lean startup.  60% success vs 18% in raising equity funding  Use Customer Development:  Talk to potential customers & test hypothesis.  Regardless of your business product/service.  Before spending time/money building the business. Bryan Jurewicz 6
  • Ideal Business Model  *Legitimate Problem/Pain  SPIN Selling (Situation = Pain = Implications = Needs)  Large Target Market  Disruptive Solution  *Must Have Value Proposition  *Attractive Customer ROI (5X+ Benefit Ideal)  *Scalable & Capital Efficient Strategy  *Measurable Real Time Success Metrics  *Proven Success & Limited Execution Risk  Maximized Pre-Investor Valuation  Excellent Risk-Adjusted Investor Return Potential *Customer Development & Acquisition Requirements Bryan Jurewicz 7
  • Know Your Revenue Model!               Products Subscription Freemium Lead Generation Commerce Social Network Marketplace Payments Gaming New Media Search Audio/Video Rental Royalties Bryan Jurewicz How does your company provide value & earn revenue? 8
  • Customer Development/Acquisition & Business Models From Disruptive Companies • Free Individual professional Toe-Hold With Initial Killer-App bios/personal web site; • Professional network connections. • 100 million+ members in 200 countries adding 1 million new members per week. Scale • Premium subscriptions- 3 levels. Monetize • • MultiDimensional Biz Models (27%) Hiring Solutions: Sell analytics to F2000 HR depts. (41%) Marketing Solutions –Targeted Ads (32%) • B2C; B2C2B (online); • B2B (offline) • Ad Model • Easy-to-use low cost project • Free cloud-based data storage • 5 million people collaborating • 25 million individual users management and collaboration tool (Basecamp); pay-as-you-go, unlimited use. on 4 million projects. • Built trusted brand (product/company) • Release more products (4) service. across the globe in LT 4 years. • Free (2GB); • Paid monthly subscriptions for 50GB; 100GB, 350+ GB cross/upsell • B2C • B2B • B2B2C • B2C • B2C2B 9
  • GradeBeam.com Case Study  $Millions Invested & Built Platform  2001 Launched @ $100/Year Subscription & .Com Crash  3 Month Direct Mail Campaign = 500 Customers  2002 Raised Price = $250/Year (+Revenue & 90% Renewal)  Print & Email Marketing, Direct Sales & Events  2003 Raised Price = $350/Year (+Revenue & 70% Renewal)  Email Marketing, Direct Sales & Events  2004 Multi-Tiered Pricing (+Revenue & 80% Renewal)  Email & Telemarketing, Direct Sales & Events  2005 Raised Top Tier Pricing (+Revenue & 85% Renewal)  Email & Telemarketing & Direct Sales  Investor Funding Ceased & Forced To Cut Staff/Bootstrap/Self Fund  2006 Held Pricing (+Revenue & 90% Renewal)  Email, Telemarketing & Independent Contractor Sales Bryan Jurewicz 10
  • What Was Missing/Learned?  Customer Development  Proven Business Model  Customer Acquisition Channels  Customer Acquisition Metrics  Customer Acquisition Costs  Successful Financial Model  Pricing Bryan Jurewicz 11
  • GradeBeam.com Success  2007 Sales Model Proven  Cash Flow Breakeven  2008 Fundraising & Sales  Secured Hyde Park Angels Investment  Real estate collapse forces contractors to do more with less.  2009 Funded Sales Model (2X Revenue)  Added 5 Sales Reps & Metrics  2010 Rebranded & Strategic Partners (2X Revenue)  Social Media, SEO & PPC  Reseller Agreements (Associations & Complementary Services)  2011 Acquired By Textura (5X Gross Revenue Multiple)  Proposed Textura Strategic Partnership  Textura Proposed Acquisition  Negotiated sale, successful exit & ROI for all investors. Bryan Jurewicz 12
  • Steve Blank’s Customer Development Bryan Jurewicz 13
  • Customer Discovery  Founders Get Out Of The Office  Interview Prospective Customers  Listen to customer pain.  Know/learn the competition.  Present your understanding of problem & solution.  Do not waste money building products. Use PowerPoint!  Ask how much your solution would help:  Time/Efficiency/Sales/Costs/Profit/ROI?  What do they spend now to solve this problem?  Do they have budget for this?  Are they willing to pay what your price or more?  More Interviews!  Leverage learnings, iterate/pivot & repeat until proven! Bryan Jurewicz 14
  • Customer Discovery  Problem/Solution Interview Example Bryan Jurewicz 15
  • Municipalities Owners Architects Engineers Associations Construction Communication Fragmentation Documents Documents Documents Documents Documents GC GC GC GC GC Subs Subs Subs Subs Subs Subs Subs Subs
  • Universal Construction Communication Network Owners Municipalities Maintai n Archive Design Close Out Export Engineers Architects Notifications Security Import Database Database Project GC Accountin g Qualifications Qualifications Viewers GC Translators Integrations GC Management API’s Email XML Fax Contracts GC Messages Messages Bids Estimates Documents Documents Subs Subs Subs Subs Subs Subs Subs Subs
  • Customer Validation (Acquisition)  Prove you can acquire customers without staff/operations.  Do not prematurely scale!  Founders focused on getting 1st sales!  Use scientific method to test customer acquisition channels.  This is growth hacking. Not a launch!  Small scale testing/iterating until proven.  Do not get a fancy office or a big salary!  No overly expensive marketing!  Sell interviewed prospective customers first.  Build repeatable marketing & sales process/metrics.  Determine ultimate financial & business model. Bryan Jurewicz 19
  • MVP (Minimal Viable Product)  What’s the minimal solution needed to get customers?  Stay focused on initial value proposition!  Eliminate everything not critical to early sales!  Minimize costs & time to market! Bryan Jurewicz 20
  • Marketing & Sales Channels 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. Search Engine Optimization (SEO) Pay Per Click (PPC) Social Media Email Marketing Press Releases/PR Telemarketing Strategic Partners Direct Mail Enterprise Sales Conferences & Events Banner Advertising Print Ads Bryan Jurewicz 21
  • GradeBeam.com Channels Building Success & Customers One Common Platform Tens Sales Reps & Channels Sales Reps Website GB Partners Architects Owners Hundreds GC Clients Direct GC Sales SEO PPC Hundreds of Thousands Thousands Sub Clients Companies Accessing GradeBeam.com Subs Invited Project Access Direct Sub Sales GC Partner Clients Sub Partner Clients GCs Invited Subs Invited Planroom Access Millions Transactions, Insights, Analytics & Client Scalability Geography: •North America->Global Construction Phases: •Bid->Construction->Close->Manage Project Data: •Qualifications, Financials & Ratings •Contractor Searches & Views •Contractor Relationships & Regions •Contractor Recommendations •Contacts & Messages •Document Activity •Bidders, Quotes & Awards •Contractor CRM/Revenue Forecasts Industry: •Economic Activity •Regional Markets •Trade Segments, Costs & Pricing •Crowd Sourcing •Targeted Marketing •Group Discounts
  • Channel Strategy Metrics Example Conversion to Campaigns Impressions Interest Member Subscriber $'s Invested Cost/ Member Cost/ Subscriber User Contests 23,400,000 819,000 286,650 8,596 $100,000 $0.35 $11.63 Pro Sponsorships 13,477,000 235,844 82,544 2,478 $60,000 $0.73 $24.21 Strategic Partner 256,000,000 704,000 176,000 1,760 $10,000 $0.06 $5.68 3,850,000 59,167 19,719 592 $60,000 $3.04 $101.35 384,616 192,311 5,770 $250,000 $1.30 $43.33 Inbound Marketing - Social 1,158,290 115,829 3,473 $22,000 $0.19 $6.33 Inbound Marketing - Content 1,191,663 297,913 8,932 $22,000 $0.07 $2.46 275,000 41,250 825 $31,084 $0.75 $37.68 18,347 735 $22,000 $1.07 $29.33 1,230,563 33,161 $577,084 Content Providers Digital Advertising - PPC E-mail 100,000,000 Inbound Marketing - Referral 396,727,000 4,827,580
  • Metrics & Terms  Customer Acquisition Costs (CAC):  Incremental costs to sell customers.  Typically marketing, sales & associated expenses.  Costs Of Goods Sold (COGS):  Costs to serve customers without marketing/sales/R&D.  Gross Profit: Gross Revenue – COGS  Gross Margin %: Gross Profit/Gross Revenue  Non-Recurring Revenue (NRR): One-time fees that are not paid upon renewal.  Monthly Recurring Revenue (MRR): Monthly continuing revenue owed by customers.  Annual Recurring Revenue (ARR): Annual continuing revenue owed by customers.  Annual Revenue Run Rate: Current Month’s MRR x 12  CAC Payback Period: Months to recover CAC = CAC/(MRR x Gross Margin%)  <6 Months Great! 6-18 Typical. 18-36 Needs High Upsells & Retention. >36 Bad!  Churn: Annual % Lost ARR or Cancelled Customers <10% Good  CLTV: Customer LifeTime Value  Simple Calculation = ARR/Churn  Detailed Calculation = Net Present Value of Recurring Profit Streams – CAC  Burn Rate: Monthly Cash Flow Loss  Runway: Months company survives @ current burn rate without funding. Bryan Jurewicz 24
  • Metrics Example Bryan Jurewicz 25
  • Marketing Resources  Internal vs External?  Are sales 100% dependent on marketing?  Anyone on your team marketed in your channels before?  Hiring proven internal resources is hard.      Can you find them? Do you know a good one when you see it? Do they know digital marketing & your industry? Can they talk about proven methods, metrics & achievements? Can they hit the ground running?  Digital: SEO, PPC & Social Media = Analytical Science  Consultants can validate digital strategy before hiring.  Digital marketing requires weekly if not daily attention. Bryan Jurewicz 26
  • Google Analytics Bryan Jurewicz 27
  • GradeBeam.com Activity 11/15/10
  • GradeBeam.com Activity 11/15/10
  • Organic Search Engine Optimization (SEO) Stats Monthly Search Average 14,992 visitors April Searches 18,309 visitors YTD Cost Per Click Average $0.07 April Cost Per Click $0.05
  • Google Adwords Bryan Jurewicz 31
  • Pay Per Click Advertising Stats
  • Other Digital Marketing Tools  Compete.com  Alexa.com  Moz.com  Hubspot.com Bryan Jurewicz 33
  • Competition
  • Hire Sales Team?  Where do you get leads & do you have enough?  Do your customers need to be touched to get a sale?  Can you sell customers yourself?  Do you have a proven ramp up sales process? (scripts, metrics & marketing collateral)  Sales Director?  Should create/improve sales process/success without reps.  This hire can make or break a company!  Interview Tips:  Role play & 1st interview telesales over the phone.  Don’t let a candidate sales rep sell you! Bryan Jurewicz 35
  • Sales Metrics?  Compensation:  50% Base + 50% Commission (3 Month Probation Period)  Base: $50K - $100K Annually  Quota: $700K - $1.2M Annually  Telemarketing = minimum 40 prospect touches per day.  Hire 2 sales reps at a time for camaraderie & competition.  Do not hire >2 reps till ARR > $1M (learning curve) & CAC < 50% (efficiency).  Sales Rep Profile:  Self motivated hunter with minimum 3 years experience.  Willing to cold call & accepts rejection.  Knows when to move on to next prospect.  Avoids Seemores, navigates to decision maker & qualifies prospects.  Good sales reps have jobs & manage their own desks!  Preferably in your industry with similar sales process & existing contacts.  Inside is very different than outside sales! Bryan Jurewicz 36
  • Strategic Partners  Larger Companies With Market Penetration  Complementary Services  Future Acquirers  Resellers  Distributors  Associations  White Label Bryan Jurewicz 37
  • Customer Creation  Launch!  Early adopters are easy customers.  Can you cross the chasm? Bryan Jurewicz 38
  • Execution Requirements  Financial Model, Cash Flow Projection, GAAP P&L  Monitoring Metrics vs Forecast  Accounting Resources, Tools, Controls & Reporting  Executive Dashboard/KPIs  Google Analytics  Goals & Business Processes  Organizational Chart, Roles &Responsibilities  Employee Knowledge of Strategy & Success Bryan Jurewicz 39
  • Company Building  You can’t do everything yourself!  What kind of leader are you?       (Example/Director/Motivator) Know what type of culture you want to create. Hire Slow & Fire Fast! Marriage: building a company is like raising a child. Get right people on the bus vs cut throat moneymakers. Try to surround yourself with people smarter than you. Build mentor training processes. Bryan Jurewicz 40
  • Raise Funding?     Know what drives revenue! Financial model calculated with revenue drivers. Valuation Now & Future What happens to your cap table?  Don’t give away more than 30% per round.  Potential Exit Opportunities?  Fundraising Takes Time!  Minimum 3-6 Months  Serious time away from company growing.  Many investors will want to watch.  Your funding competition is other startups.  Know Investor’s Goals  Exit early, go big or go home? Bryan Jurewicz 41
  • 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. Pre-Funding Checklist: Backable Team: Visionary, Hacker & Hustler (Ideally been there/done that.) Post MVP Early Production Product Multiple Target Markets Early Product Market Fit Scalability Proven Sales Channels & Success Metrics Vetted Financial Forecast Path To Profitability Funding Needed Use Of Funds Budget Funding Success Milestones & Goals Runway Estimate Pre/Post-money Valuation Estimated Future Funding Needed # of Funding Rounds Potential Exit Strategies Forecasted Enterprise Valuation Calculated Return Bryan Multiple Investor Leads, Contacts & Relationships Jurewicz Marketing Documents 42
  • Terms, Structure & Preferences  Loans/Convertible Notes/Equity  Blocking Rights  Preemptive Rights  Co-Investment Rights  Pro-Rata Rights  Dividends  Discounts  Caps  Etc…. Bryan Jurewicz 43
  • Exit?       Know your market, growth potential & valuation. Quarterly SWOT Analysis Better to be bought than sold. Today’s strategic partner could be tomorrow’s acquirer. Create pain for your competitors. Go big or exit early?  What are your realistic exit opportunities/timeframes?  What are your & your investor’s goals?  Can you carry the long term load/risk?  Will you get pushed aside?  IPO requires >$40M funding! Bryan Jurewicz 44
  • Thanks!  Questions?  How can I help?  Connect with me -> Bryan Jurewicz Entrepreneur/Executive/Advisor Accelerating Growth, Funding & Exits Resources Bryan Jurewicz @BryanJurewicz SEO/PPC Tools:  Book - Ultimate Guide To Google AdWords (Perry Marshall)  Google Analytics/Moz.com/Alexa.com/Compete.com/Hubspot.com  Andy Crestodina & Orbit Media Blog www.OrbitMedia.com/Blog/Marketing-SEO Startup Classes:  Udacity – How To Build A Startup (Steve Blank) www.Udacity.com/course/ep245  Business Model Generation (Alexander Osterwalder) www.BusinessModelGeneration.com/OnlineCourse  UW - WARF Entrepreneurons Startup Series Videos www.WARF.org/Home/News-Media/Campus-Programs/Entrepreneurons-Series/Video-Archive/Entrepreneurons-Videos.cmsx Startup Books:  Business Model Generation (Alexander Osterwalder)  Four Steps To The Epiphany (Steve Blank)  Lean Startup (Eric Ries)  Startup Owner’s Manual (Steve Blank) 45