This presentation will help you drastically improve your knowledge and skills in creating business / simplified financial models in Excel for traditional offline (brick and mortar) business such as: Retail, B2C services (i.e. restaurants) and products, B2B services (i.e. professional services, consulting) and B2B products (commodities). It is designed for those who want to become consultants, business analysts and people who need to be able to analyze any business in Excel. In the presentation you will learn 4 things:
1. What your business model is about, what to concentrate on and what are the most important KPIs for you?
2. How to translate your business model into Excel and evaluate it?
3. How to draw conclusions using your business model in Excel?
4. Estimate what will be the impact of specific changes that you may consider in your business
The presentation is based on my 12 years of experience as a consultant in top consulting companies and as a Board Member responsible for strategy, improvement and turn-arounds in biggest companies from FMCG, SMG, B2B sector that I worked for. On many occasions I had to build business models in in Excel in order to estimate what is the value of the business and find ways in which I can improve it. Business models are also useful for internal purposes: planning, looking for opportunities, analyzing performance, business development.
Organizational Structure Running A Successful Business
Business Modeling of offline businesses in Excel
1. 1
Business Modeling of offline
businesses in Excel
Practical Guide how to check whether your business makes sense
2. 2
Business modeling is about capturing the logic of the business via
main KPIs and modeling this in Excel.
# transactions
Average
revenue per
transaction
Total revenue
x
% Fee of the
marketplace
Average
transaction value
Total searches % conversion
x
x
Total Costs
Total margin
-
Rent
People
Cost of traffic
Ratio of visitors
to searches
Average cost of 1
visit
+
x
Development
3. 3
SaaS
E-commerce
Media site
2-sided market
User Generated Content
Mobile Applications
Retail
B2C Service
B2B Service
FMCG
SMCG
Commodity
There are 6 offline business models and 6 online models. In
this presentation I will discuss the offline models
4. 4
SaaS
E-commerce Media site2-sided market
UGC
B2B Service
B2C ServiceRetail
Bear in mind that big companies can operate many business
models
6. 6
For every model I will discuss 4 different fields
Examples of
companies
Drivers for the
business model
Things that matter in
the business model
Step by step business
modeling
7. 7
Thanks to this presentation you will
learn how model businesses in
Excel and how to draw the right
conclusions
8. 8
This presentation is just a small part of my online course where
you will find also all models in Excel. Below link with great
discount
Click to check my course
Business Modeling of offline
businesses in Excel
$45
$ 0
10. 10
There are 2 types of models that you will be building
Financial Model Business model
▪ Mainly done for budgeting and valuation ▪ Mainly done managing business, searching
for opportunities
▪ Financial models look very similar ▪ Business models are specific to the company,
the industry and the business model
▪ Used heavily for external purposes: talk with
the Supervisor Board, banks, future investors,
auditors
▪ Used heavily for internal purposes: planning,
looking for opportunities, analyzing
performance
▪ Generates financial statements: P&L, BS, CF
▪ Is driven by many KPIs and quantitative
elements. Shows in-depth relation between
KPIs
▪ Has some KPIs and quantitative elements
13. 13
Retail sounds very simple. You have to get the right stock in
front of the right customers at the right moment
14. 14
Yet there are some issues that simple make it difficult in
execution
You have many
segments of
customers
Their come with
different
missions
Product Range is
huge
Demand is very
erratic /
seasonal
Your supply
chain is very
complex
15. 15
Let’s have a look at the example of a home improvement /DIY
store
You have many
segments of
customers
Their come with
different
missions
Product Range is
huge
Demand is very
erratic /
seasonal
Your supply
chain is very
complex
▪ Regular people
that do
renovation
infrequently
▪ Fans of
renovation you
are constantly
doing something
▪ B2B customers
▪ Building new
house
▪ Preparing the
apartment to
move in
▪ Renovation
▪ Small
improvements
▪ Small refill
purchases
▪ 60 K SKUs regular
▪ 15 K SKUs
seasonal
▪ Peaks in the
Spring and
summer
▪ Low season in
winter
▪ You have local
suppliers of
heavy things (i.e.
bricks),
▪ National
suppliers
▪ Foreign regional
suppliers (i.e.
European)
▪ Asian suppliers
(especially China)
16. 16
Let’s have a look at another example of a kids’ ware retail
chain
You have many
segments of
customers
Their come with
different
missions
Product Range is
huge
Demand is very
erratic /
seasonal
Your supply
chain is very
complex
▪ Parents
▪ Non-parents
▪ Pre-born
purchase
▪ Regular
purchases
▪ Gifting
▪ Education and
Development
▪ 40 K SKUs regular
▪ 10 K SKUs
seasonal
▪ Short life of SKUs
– Toys last in
most cases up to
1 year; Fashion –
6 months
▪ Peaks in the
Christmas and
around special
gifting days
▪ Low season in
Summer and
after Christmas
▪ Regional brand
suppliers
▪ Asian suppliers
(especially China,
India,
Bangladesh)
18. 18
Let’s have a look at the main challenges in Retail
Margin Management
Stock / Inventory
Management
Multichannel
Strategy
Managing price
across channels
Expansion to new
markets
Saturation of existing
markets
New product
development
Managing customer
experience across
channels
Format evolution
(possible death)
People rotation and
knowledge
management
Disruption esp. from
external forces /
business models
Automation
20. 20
We start by estimating the total sales of Stores. That depend on
average transaction value (ATV) and the number of transactions
# Transactions
Average Value
Transaction
Total store revenue
x
21. 21
We can estimate the number of transaction using the number of
visits and conversion rate
# Transactions
Average Value
Transaction
Total store revenue
x
# of Visitors % Conversion
x
22. 22
Average Transaction Value depends on the average value of basic
purchase as well as some suggested purchases (i.e. suggested
products)
# Transactions
Average Value
Transaction
Total store revenue
x
Average Value
Transaction of basic
purchase
Average Value
Transaction of
additional purchase
# of Visitors % Conversion
+
x
23. 23
If we have the % Gross margin we can use it to estimate the total
gross margin generated by stores
# Transactions
Average Value
Transaction
Total store revenue
x
Average Value
Transaction of basic
purchase
Average Value
Transaction of
additional purchase
# of Visitors % Conversion
+
x
% Gross Margin
Gross Margin generated
by the store
x
24. 24
The last piece is getting the fixed costs (esp. rent and people
# Transactions
Average Value
Transaction
Total store revenue Total store costs
x
Store EBITDA
Average Value
Transaction of basic
purchase
Average Value
Transaction of
additional purchase
# of Visitors % Conversion
Rent
People
+
x
Others
+
% Gross Margin
Gross Margin generated
by the store
x -
25. 25
We can also show what drives rent and salaries costs
# Transactions
Average Value
Transaction
Total store revenue Total store costs
x
Store EBITDA
Average Value
Transaction of basic
purchase
Average Value
Transaction of
additional purchase
# of Visitors % Conversion
Rent
People
# of People
Average wages
+
x
x
Others
+
# of sq. m
Fee per sq. m x
% Gross Margin
Gross Margin generated
by the store
x -
26. 26
To see how to build the model in Excel go to my on-line course.
Below link with great discount
Click to check my course
Business Modeling of offline
businesses in Excel
$45
$ 0
28. 28
In e-commerce you will have 3 types of players depending on
their presence in off-line and their approach to both channels
E-commerce
Pure players
Off-line players with
separate on-line presence
Multichannel /Omni
players
29. 29
Customer behaviors has huge impact on the business model and
on what the e-commerce should concentrate on
▪ Less than 40% of the buyers will buy this year
▪ Focus is on customer acquisition
▪ Loyalty program are not good investment
▪ 70% of e-commerce businesses are in this model
Acquisition
mode
Description of the business model Examples
▪ E-commerce selling only 1 type of Slow Moving
Consumer Goods (SMCG) bought infrequently i.e.
vacuum cleaner, scuba diving, furniture
▪ E-commerce for 1-time in the life event: strollers,
▪ 40%-60% of the buyers will buy this year
▪ You have a nice mix of new and returning customers
▪ Focus is on customer acquisition as well increasing the
value of the customer (increased frequency and
increased purchase per visit)
Hybrid mode
▪ E-commerce that sells SMCG with relatively big
frequency of purchase(1.0-2.5 times a year ) i.e.
shoes (Zappos)
▪ More than 60% of the buyers will buy this year
▪ Focus is on increasing the value of the customer
(increased frequency and increased purchase per visit)
▪ 10% of businesses are in this modelLoyalty mode
▪ Very strong brands with high frequency of
purchase (i.e. Zara, Amazon)
▪ Marketplaces i.e. Udemy, Uber
Source: Lean Analytics: Use Data to Build a Better Startup Faster; A. Croll, B. Yoskovitz
30. 30
Just to remind you some examples of well known e-commerce
businesses
Products sold On-line / Off-line situation
▪ Virtually everything esp.
books, toys, fashion
Mode
▪ Pure on-line player ▪ Loyalty mode
▪ Fashion ▪ Multichannel player ▪ Loyalty mode
▪ Tickets for events ▪ Pure on-line player ▪ Acquisition mode
▪ Groceries ▪ Multichannel player ▪ Hybrid mode
▪ Razors and cosmetics
for men
▪ Pure on-line player ▪ Loyalty mode
▪ Fashion ▪ Pure on-line player ▪ Hybrid mode
31. 31
VISIT
PAID DIRECT SEARCH
To understand the logic of e-commerce business model have a look at the
visualization of how it works
RECO ENGINENAVIGATION
BOUNCED
NOT INTERESTED
ABANDONED
UNSATISFIED
ONE-TIME BUYER UNSOCIAL BUYERCALL TO ACTION
OPEN RATE
SEARCH
CART
ADDITIONS
CONVERSION
LOGISTICS, DELAYS
VIRALRETURNING
CAC PageRank
Bounce rate
Sharing rate
Abandonment,
conversion rates
Ratings, delivery issues
Signups
Mail/RSS/TwitterReturning rate
Customer Lifetime Value Transaction size
Emphasis on repurchase rate,
frequency, click-through rate,
lifetime value
Emphasis on
maximizing cart
value, minimizing
acquisition costs
DELIVERY
SHARINGENROLLMENT
Source: Lean Analytics: Use Data to Build a Better Startup Faster; A. Croll, B. Yoskovitz
32. 32
There are some KPIs for e-commerce model that you have to follow…
▪ Percentage of visitors that buy products
▪ Should be calculated by sources of traffic
▪ Use funnel analysis to get to the stage / factor that kills
your conversion rate
Conversion rates
Definition Why it is important?
▪ Shows you whether you have good selection of
products, how good is the customer experience,
pricing.
▪ Average value of purchases done by a single customer
during a single transaction
▪ Should be calculated by groups of customersAverage
shopping cart
size / Average
transaction
value (ATV)
▪ Shows you how much a customer spends during
one visit to your site
▪ Look also at the number of items in the basket
▪ Compare the average transaction to the average
which should be if you were doing proper cross
selling and sales of complementary products
▪ % of people who abandon their basket – stop the
purchase although they had intent
Abandonment
rate
▪ Tells you that there is some sort of friction at the
very end of the process – customers despite the
intent does not buy
▪ High abandonment rate can be caused by: too
complicated procedure of buying, hidden costs
that are shown at last moment, shipping costs,
limited payment methods (you do not have some
method very popular in a given country) etc.
33. 33
There are some KPIs for e-commerce model that you have to follow…
Definition Why it is important?
▪ Total margin generated by customer from start to end
of his relation with you
▪ LTV=Average transaction*% Gross Margin* Number of
transaction during the relation with the customer
▪ Analyze it by cohorts / segments
Life Time Value
of the Customer
(LTV)
▪ Shows you how much your customer is worth
from cradle to grave
▪ Helps you take decisions on acquisition
techniques
▪ % of traffic generated by your efforts to create brand,
understand and connect with the customer (incl.
loyalty program), SEO, affiliate programs
▪ Measure it by methods / sources of traffic
% traffic
generated by
non-ad methods
▪ Tells you how much traffic you are able to create
regardless of advertisements
▪ Average cost of acquiring a customer
▪ Should be calculated by methods of acquisition
▪ Should be calculated by groups of customersCustomer
Acquisition Cost
(CAC)
▪ Tells you how much you have to spend to acquire
a new customer
▪ Helps you estimate your CF burned with scaling of
the business
▪ Helps you optimize acquisition methods and
select the right source of traffic
▪ Number of purchases done by unique customer per
year with you
▪ Compare it to the average ideal number of purchases
▪ Should be calculated by groups of customers
Number of
purchases per
visitors per year
▪ Helps you understand how important you are to
the customer, how much do you weight in his
basket of purchases of this category
▪ Helps you estimate the potential to grow with
your current customers
34. 34
There are some operational KPIs for e-commerce model that you
have to follow…
Definition Why it is important?
▪ % of goods return by customers due to not matching
their expectation
▪ Extremely important for pure players
Return rate
▪ Shows you how many customers where not
pleased with the products and what is the
operational burden of the customer promise not
met
▪ Average additional sales generated for multichannel
players by customers who ordered on-line but pick up
the product at the store
▪ Extremely important for multichannel players
Average
additional sales
for click and
collet
▪ Multichannel player to stay competitive should
generate additional sales during the visit of
customer picking up the goods at the store.
▪ Small value shows future problems in competing
with pure players
▪ % of click and collect orders in orders generated on the
web
▪ Extremely important for multichannel players
% click and
collect orders
▪ Shows you how willing the customers are to visit
your off-line shop to collect the product and thus
to experience the brand promise represented by
the shop
▪ Small value shows future problems in competing
with pure players
35. 35
Have a look a the typical values of KPIs for the e-commerce
▪ Most sites will have
2-3%
▪ For some very niche
sales this should be
much higher (>15-
20%)
Conversion
rates
Values which are ok Best practice values
▪ For sites with strong blog you should
exclude the traffic for the blog to get the
right picture
Average
transaction
Abandonment
rate
Return rate
Comments
▪ General sites – 10-
15% (Amazon,
Tickets.com, eBay)
▪ Niche sites – up to
40 %
▪ Depends very `much
on industry
▪ In multichannel you
should see 50%
bigger ATV for on-
line than for off-line
▪ Look at ways in which you can improve it:
cross-selling, complementary sales,
playing with shipping costs (with lower or
subsidize above some threshold people
ten to buy more), up-selling,
▪ In multichannel you
should see up to
400% bigger ATV for
on-line than for off-
line
▪ < 50% ▪ Analyze it by reasons of abandonment and
solve them as soon as possible
▪ 10-25%
▪ 10-25% ▪ Depends heavily on the industry – the
more customizable, dependent on
customer features product is the higher
the return rate will be
▪ 2-5%
36. 36
You should test and find optimal solution for the following key
topics in e-commerce
▪ Due to easiness with which you can establish the e-
commerce business it becomes vital to be able to
attract cheaply / for free loads of traffic
▪ This includes SEO, loyalty, content marketing and
others
Getting a lot of
cheap traffic
Description Goal
▪ More important is to find ways to get free
search, entries from newsletters and social media
than direct entry to the webpage
▪ Pricing is very complicated in the e-commerce due to
existence of aggregators and sites comparing offers.
▪ You have to be on comparable products competitive
and earn on the non-comparables and long tail items,
obscuring comparables, bundles
▪ In a multichannel environment you may have different
prices for the same product bought on-line an off-line
Pricing
▪ You are looking for such pricing policy that
optimizes total margin generated
▪ You have to gather as much information on your
customers and create automated actions build into
your website as well as your other assets (i.e. email list,
blog, YouTube channel)
Understanding
your customer and
automate
marketing
▪ Increase conversion,
▪ Increase AVT
▪ Get more free traffic
▪ Increase purchasing frequency
37. 37
You should test and find optimal solution for the following key
topics in e-commerce
▪ Although it is easier than in physical store to keep wide
range of products you will be not able to satisfy
customer needs only on the basis of your own stock
▪ You have to integrate yourself with other suppliers to
get access to wide range of stock
Managing the
long tail
Description Goal
▪ Depending on your concept and brand you have
to decide what is your target in terms of long tail
products availability and how you meet it (own
stock or 3rd parties)
▪ Maximize gross margin
▪ Minimize stock-outs
▪ Your site – the way it is designed, its features may have
big impact on how you convert traffic into customers
therefore you have to optimize it through series of A/B
testing
▪ This also includes following the trends in the way
customers purchase (i.e. the mobile trend)
Continuous
optimization of
your site
▪ Increase conversion,
▪ Increase AVT
▪ Get more free traffic
▪ Increase purchasing frequency
38. 38
To see how to build the model in Excel go to my on-line course.
You will also get there the model in Excel. Below link with great
discount
Click to check my course
Business Modeling of offline
businesses in Excel
$45
$ 0
40. 40
Before we go to Excel let’s talk about the logic we used to
build the e-commerce Excel model
▪ Conversion rate
Visits
# of
transactions
Revenues
Gross
Margin
Net Margin
Operating
Profit
▪ ATV
▪ Cost of traffic
▪ Cost of logistics
▪ Transaction fees
▪ Fixed Costs
▪ % Gross
Margin
43. 43
We can be talking about 3 different models here
Services performed at specialized
place no production involved
Services performed at customer
place
Services performed at specialized
place with some production
45. 45
We can be talking about 3 different models here
Services performed at specialized
place no production involved
Services performed at customer
place
Services performed at specialized
place with some production
46. 46
Let’s see what are the main challenges in the 1st type of
services
Services performed at specialized
place no production involved
Services performed at customer
place
Services performed at specialized
place with some production
47. 47
The 1st type of services (hairdressers, beauty shops, repair
garages) have to face the following challenges
Location
Minimizing and
Managing Fixed Costs
Optimizing Capex
Seasonality of
Demand
Upsell and cross-sell
Standardization of
services
Queue ManagementPrice Discrimination
Capacity
management
People rotation and
knowledge
management
Growing customer
base despite
infrequent purchases
Utilization of people
48. 48
Now let’s move on to 2nd group – services with some
production
Services performed at specialized
place no production involved
Services performed at customer
place
Services performed at specialized
place with some production
49. 49
The 2nd type of services (restaurant chains) have to face the
following challenges
Location
Minimizing and
Managing Fixed Costs
Optimizing Capex
Seasonality of
Demand
Upsell and cross-sell
Standardization of
services
Queue ManagementPrice Discrimination
Capacity
management
People rotation and
knowledge
management
Growing customer
base despite
infrequent purchases
Utilization of people
50. 50
The 3rd group will differ significantly from the first two
Services performed at specialized
place no production involved
Services performed at customer
place
Services performed at specialized
place with some production
51. 51
The 3rd type of services (plumber, electricians) have to face
the following challenges
Location
Minimizing and
Managing Fixed Costs
Optimizing Capex
Seasonality of
Demand
Upsell and cross-sell
Standardization of
services
Queue ManagementPrice Discrimination
Capacity
management
People rotation and
knowledge
management
Growing customer
base despite
infrequent purchases
Utilization of people
53. 53
In the next lecture I will show you the main drivers of the B2C model
and on the basis of this we will create a business model in Excel
# transactions
Average
revenue per
transaction
Total revenue
x
% Fee of the
marketplace
Average
transaction value
Total searches % conversion
x
x
Total Costs
Total margin
-
Rent
People
Cost of traffic
Ratio of visitors
to searches
Average cost of 1
visit
+
x
Development
54. 54
To show you how to model B2C service we will use the example of a
restaurant
Services performed at specialized
place no production involved
Services performed at customer
place
Services performed at specialized
place with some production
56. 56
When you want to set up a restaurant you have to not only
face the monthly recurring costs but also invest a huge
amount of money into the place
57. 57
Have a look what you will spend your money on long before
opening of the restaurant
Purchase of the place
Furniture
Design
Kitchen equipemt
Domestic
Appliances
Computer, cash
till, POS
Uniforms for
employees
58. 58
There are plenty of monthly costs that have to be paid every
month
Food and
drinksUtilities (water,
electricity, gas, waste)
Stock
Rental of the place
Services i.e.
book-keeping
Cleaning costs
Personel
60. 60
Let’s have a look at the simple model
▪ Number of meals per
day
▪ Number of days
Restaurant
# of
transactions
Revenues
Gross
Margin
Net Margin
Operating
Profit
▪ ATV - average
▪ Cost of marketing
▪ Franchising Fee
▪ Other Variable costs
▪ Fixed Costs
▪ % Gross
Margin
▪ % Food
ratio
61. 61
In the part about the using store checks for location analysis
we were
Passing by
Engaged / stopping
Leaving
Taking away
In store
62. 62
Before we go to Excel let’s talk about the logic we used to
build the e-commerce Excel model
▪ Conversion rate to
consumption at the
restaurant
▪ Conversion rate into
takeaways
Visits
# of
transactions
Revenues
Gross
Margin
Net Margin
Operating
Profit
▪ ATV for both
subgroups
▪ Cost of marketing
▪ Franchising Fee
▪ Other Variable costs
▪ Fixed Costs
▪ % Gross
Margin
▪ % Food
ratio
63. 63
To see how to build the model in Excel go to my on-line course.
You will also get there the model in Excel. Below link with great
discount
Click to check my course
Business Modeling of offline
businesses in Excel
$45
$ 0
65. 65
There are some important KPIs you should pay attention to
Daily Capacity
% utilization
% of Take-Aways
Average
Transaction
Value (ATV)
% of Ordered
via on-demand
marketplaces
# of daily
customers
% of Loyal
Customers
% Conversion
rate
% Gross Margin
Inventory in
days of sales
Sales Density Margin Density
68. 68
Due to margins and integration with you we can divide the
B2B services into 3 groups
Professional service Other external servicesOutsourcing of your process
▪ Lawyer
▪ Auditors
▪ Consultants
▪ Marketers
▪ Production Process
▪ Maintenance Process
▪ Book keeping and reporting
▪ Shared Service Canters run by
external companies
▪ Logistics
▪ IT
▪ Measuring
70. 70
Let’s have a look at the main challenges in B2B services
Utilization of people
People rotation and
knowledge
management
Upsell and cross-sell
Seasonality of
Demand
Optimizing Capex
and Opex
Automation
Standardization of
services
Price Discrimination
Capacity
management
Productization of
services
Growing new
businesses using
customer base
Minimizing and
Managing Fixed Costs
72. 72
Service companies in general are all about converting your
workers time into money
Man-hours
73. 73
There are some general rules that you should follow
Measure man-hours
Measure tasks
Stay productive and
efficient
Make sure supply matches
demand
Forecast and create
demand
Manage supply ahead of
time
Make sure that margins are
OK
75. 75
To show you the business modelling in Excel I will use the
consulting business model as an example
Professional service Other external servicesOutsourcing of your process
76. 76
The typical model of a service model can be presented using
this logic
▪ % Utilization# hours
available
# of billable
hours
Revenues
Gross
Margin
Operational
Profit
Net Profit
▪ Hourly fee
▪ HQ costs
▪ Bonuses
▪ Interest
▪ % Gross
Margin
▪ Wages
77. 77
To see how to build the model in Excel go to my on-line course.
You will also get there the model in Excel. Below link with great
discount
Click to check my course
Business Modeling of offline
businesses in Excel
$45
$ 0
82. 82
For branded FMCG product I propose to have a look at the
following aspects
Brand Awareness
Reach (Weighted and
numeric distribution)
Your strategy across
many channels
Managing price
across channels
Leveraging the brand
Spreading beyond
original target group
Product lifecycle
Managing customer
experience across
channels
Efficiency of
marketing activities
Lifecycle of your
target groups
Seasonality
84. 84
In the modeling phase I will concentrate on branded FMCG
products. The model will be created for cosmetics
Branded FMCG with strong brand
awareness
Private labels
Private
label
85. 85
In the next lecture I will show you the main drivers of the FMCG
model and on the basis of this we will create a business model in
Excel
# transactions
Average
revenue per
transaction
Total revenue
x
% Fee of the
marketplace
Average
transaction value
Total searches % conversion
x
x
Total Costs
Total margin
-
Rent
People
Cost of traffic
Ratio of visitors
to searches
Average cost of 1
visit
+
x
Development
87. 87
The FMCG business model is driven by some basic KPIs
# sold
Unit production
cost
Gross Margin Head office
Operational profit
Fixed Cost /
Quantity produced
Unit variable cost
+
Cost of sales &
marketing
Net Margin
-
-
Average price
Unit Gross Margin
-
x
Market share Market size
88. 88
To see how to build the model in Excel go to my on-line course.
You will also get there the model in Excel. Below link with great
discount
Click to check my course
Business Modeling of offline
businesses in Excel
$45
$ 0
90. 90
Let’s go through basic assumptions of the model
FMCG product MarketingSales Channels
▪ Cosmetics – 1 product
▪ 1 production site
▪ Traditional small stores
▪ Retail chain
▪ TV ads
▪ Market research
▪ Social Media
▪ Mailing
▪ Loyalty program
▪ Outdoor campaigns
93. 93
The commodity is one of the most difficult business. You have a non-
differentiated product and the price pressure is destroying the
margins
94. 94
The commodities are characterized by some important things
Very low margins
Usually high Capex
Cyclical demand connected
with GDP growth
Natural tendency to
consolidate
Mature industries
Low growth
Transparency
Educated buyers esp. in
B2B
96. 96
Let’s have a look at the main challenges in Commodities
Operational
Excellence
Market Structure –
oligopoly or
monopoly
Cyclicity of demand
Capacity
Management
Catchment analyses
(supplier, customer)
Creating barriers of
entry
Product
differentiation
Reaching strong
buyer position
Turning the product
into service
Investments enabling
the demand for your
product
Changing economics
of facilities - lower
Capex
Vertical integration
esp. downstream
98. 98
The commodity business model is driven by some basic KPIs
# sold
Unit production
cost
Gross Margin Head office
Operational profit
Fixed Cost /
Quantity produced
Unit variable cost
+
Cost of sales &
marketing
Net Margin
-
-
Average price
Unit Gross Margin
-
x
Customer
catchment area
Supplier
Catchment
Area
99. 99
To see how to build the model in Excel go to my on-line course.
You will also get there the model in Excel. Below link with great
discount
Click to check my course
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businesses in Excel
$45
$ 0
100. 100
Check also business modeling of online businesses in Excel
Business models
Practical guide for startups and entrepreneurs
presentation
101. 101
You can also find useful some tips on analyzing Retail
Retail for Business Analysts and
Management Consultants
A practical guide
presentation
102. 102
You can also find useful some tips on Excel
Essential Excel for Business
Analysts and Consultants
A practical guide
presentation
103. 103
Check my presentation other presentations
Essential Lean Manufacturing for
Management Consultants
Practical guide how to cut costs
presentation
104. 104
Check my presentation that will help you get into consulting
How to get into consulting
Practical guide how to pass the case part
presentation
105. 105
I recommend also looking at some techniques to improve
your business. Click on the cover below to go to the
presentation
How to become world class
analyst
A practical guide
presentation
106. 106
Check also my other presentations
Management Consulting
Presentations
Practical guide how to prepare a great presentation
presentation
107. 107
Check also my other presentations
Production for Management
Consultants
Practical guide
presentation
109. 109
….and how to perform market research
Market research
Practical guide for startups and entrepreneurs
presentation
110. 110
Check my presentation on starting and running consulting
company
How to create management
consulting presentations?
A practical guide
presentation
111. 111
Check my extensive presentation on productivity hacks to see
how you can me 10x more productive
Management consultant
productivity hacks
How to be lazy and still get things done
presentation
112. 112
If you need more detailed version on productivity hacks you
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Productivity Hacks
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113. 113
Check my presentation on restaurant business model to
understand it properly
How to open a successful
restaurant
A practical guide
presentation
114. 114
Check my presentation on on-line models to understand
them properly
On-line Business Models
A practical guide
presentation
115. 115
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On-line Business Models in Excel –
Practical Guide
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116. 116
Check my presentation on starting and running consulting
company
Start and run consulting
company
A practical guide
presentation
117. 117
There is an interesting summary of ways to test cheaply
businesses
MVP – how to test your business
idea without building the
product
A practical guide
presentation