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Financial Blocks - Business Model Generation


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Session in #Irbid talking about financial blocks of Business Model generation for startups.

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Financial Blocks - Business Model Generation

  1. 1. Session Frame Revenue Stream Financial Statements Cost Structure
  2. 2. Introduction • 90% of new businesses fail in the first 3 years because they fail to understand their costs or what it will take to create the goods and services they have promised in their value propositions. • Describes the most important costs incurred while operating under a particular business model. Creating and delivering value, maintaining Customer Relationships, and generating revenue all incur costs.
  3. 3. Key Questions • What are the fundamental costs derived from my business model? • Which Key Resources represent a significant expense to the business? • Which Key Activities represent a significant expense to the business? • How do your Key activities drive costs? • Are the above mentioned activities matched to the Value Propositions for your business?
  4. 4. Cost Structure
  5. 5. Cost Structure • When an entrepreneur has effectively figured out their key resources, key activities and key partnerships the aforementioned costs become easier to calculate. • Must evaluate the cost of creating and delivering the value proposition, creating revenue streams and focus on long- term customer relationships.
  6. 6. Types Cost Driven Value Driven -Reduce Cost - Cheap price - Reduce internal cost - Efficiency operation -Focus on value - Focus on creation - Create customer experience
  7. 7. Characteristics Fixed Cost Variable Cost -Exist regardless the volume produced - Manufacture industries generate high fixed cost - Change by time -Depend on the volume - Sensitive to changes in demand & supply - Represented by utilities & raw materials
  8. 8. Characteristics
  9. 9. Revenue Stream
  10. 10. Revenue Stream • For what value is each Customer Segment truly willing to pay? Successfully answering that question allows the firm to generate one or more Revenue Streams from each Customer Segment. • Each Revenue Stream may have different pricing mechanisms
  11. 11. • Transaction revenues: Resulting from one-time customer payments. • Recurring revenues: resulting from ongoing payments to either deliver a Value Proposition to customers or provide post-purchase customer support. Types
  12. 12. Pricing Strategy • Cost-based pricing: Set your price as a multiple of cost, or cost plus a determined amount. • Value-based pricing: Base your price on what your product and service is worth to the buyer. • Market-based pricing: Let the market determine the price.
  13. 13. Revenue Generation Asset sale Ownership rights are sold of a physical product Usage fee Use of a particular service is sold, the amount paid depending on the usage. Subscription fees continuous or repeated access to a service is sold. Lending/Renting/Leasing granting someone the exclusive right to a particular asset for a fixed period in return for a fee Licensing the content owners retain copyright while selling licenses to third parties Brokerage fees derives from an intermediation services performed on behalf of two or more parties Advertising Fees for advertising a particular product, service or brand form the basis of this Revenue Stream.
  14. 14. Financial Statement • If you have shareholders, they need to know how you are doing and financial statements are the cleanest way to show your progress. • If you are looking for investors, they will want to look at your financial statements to assess the viability of investing in your company.
  15. 15. Assumptions
  16. 16. Example
  17. 17. Break-Even point "At what level of sales will my company make a profit?"