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Business Models: Growth & Value Creation
MasterClass @ Microsoft Ventures
Bangalore, 8th April 2015
Anjana Vivek; anjana@venturebean.com
VentureBean Consulting Private Limited
Business Models – A Brief Introduction
Stock Take – At the Start
Growth: Sales and Beyond Sales
Valuation and Value Creation
Other Aspects to Consider
Appendix
Agenda
2 2
VentureBean Consulting Private Limited
WHAT IS A BUSINESS MODEL
• Business model
From Wikipedia, the free encyclopedia
A business model describes the rationale of how an
organisation creates, delivers, and captures value
(economic, social, or other forms of value). The
process of business model construction is part of
business strategy.
3
VentureBean Consulting Private Limited
EXAMPLES OF INDIAN COMPANIES…
Where the business model was different from
those existing at that point in time:
• Bharti Airtel
• Big Bazaar
• RedBus
• Café Coffee Day
4
VentureBean Consulting Private Limited
Business Model Canvas: 9 building blocks
BUSINESS MODEL CANVAS (BMC)
• Customer segments
• Value propositions
• Channels
• Customer relationships
• Revenue streams
• Key resources
• Key activities
• Key partnerships
• Cost structures
SOURCE:http://www.businessmodelgeneration.com/canvas
• Acknowledgements:
– Wikipedia, the free encyclopedia
– http://www.businessmodelgeneration.com
– http://www.businessmodelhub.com
– Alexander Osterwalder
5
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AT THE START
• Stock Take of where you are today:
– Revenue
– Number of offices
– Employees
– Lines of business/products/service
– Kinds of customers / categories
– Key Cost elements
– etc..
• Create an MIS that you can work with; for eg. to
manage your health & wellness you start with
measuring a few key parameters like Weight (vs.
age); Lipid Profile, Sugar Count, Blood Pressure..
6
VentureBean Consulting Private Limited
AT THE START – Plans/Goals/Vision
• Are you able to articulate what your business is
about in 1-2 sentences
7
VentureBean Consulting Private Limited
Next Setting Goals/Targets: Planning
• In 3 dimensions of time: short term, medium
term and long term
– Dream: For the long term.. dreams and aspirations
drive you and the business
– Launchpad: For the short term, details are easier to
think through, assumptions are fewer
– Directional: For the medium term it is more of guess
work and trend analysis and less of data
• It is good to periodically go back and forth
between these time zones and check for
patterns, consistency, thought process..
8
VentureBean Consulting Private Limited
Setting Goals/Targets
Planning for Alternate scenarios for eg:
• Funded/Non-Funded/Boot-strap
• Pessimistic, realistic and optimistic
• With alternate business models; impacting
strategy and cash flow
• And more..
9
VentureBean Consulting Private Limited
Growth
Key Growth Parameters
• Sales / Customers
• Profit
• Cash-flow
• Other such as employees; multiple city branches; retail
outlets etc.
• .. etc
• Value
10
VentureBean Consulting Private Limited
Sales: Analysis
• Segments
– B2B
– B2C
– Retail
– online etc.
– Analyse % of sales and quantity of sales in each
category (as applicable)
• What are the activities to reach out and get
revenue from each of these segments?
11
VentureBean Consulting Private Limited
Sales: Analysis
• Review findings
– Where is maximum sales coming from?
– Where is maximum effort made for sales?
– Are you spreading yourself too thin?
– Are you missing out on low hanging fruit?
• Can you tweak your sales plan?
• Can you target segment-by-segment sales in a
phased manner?
• Can you unbundle and bundle offerings to be more
meaningful?
• Go beyond sales, where is value to customer, where
is value perceived by customer?
12
VentureBean Consulting Private Limited
Sales: More analysis
• Sales – Quantity (In numbers; in amount)
• Sales – Quality: for example
– category A customers – ie Customers with revenue over Rs.1000
cr; MNCs; listed companies; premier organisations etc..
– Number of high value customers
– Percentage of revenue from top few custumers
– in terms of product/service/vertical/location etc
• Customers churn/T.O : lost and gained in a period
• Average revenue per customer
• Profitability: segment-category wise
• Pricing plans, alternates, for differently bundled offerings
13
VentureBean Consulting Private Limited
Sales Pipeline
• Categorise and list names as:
– Existing/Existing Biz
– Existing/New Biz
– New Customers/New Biz
– Not yet on horizon (particularly when you are looking
at sales forecast say 6 months from today, some
potential customers may not yet be on horizon
14
VentureBean Consulting Private Limited
Sales Pipeline
• How can you increase the pipeline funnel
– List network contacts
– Cold calls
– move out of your comfort zone and set
ambitious/aggressive targets: for eg. how can you double
number of meetings this week
– .. etc..other?
• Periodically review sales/marketing strategy and
execution with results.. i.e. track performance with
activity
• What could be barriers to sales growth; how can you
overcome these?
15
VentureBean Consulting Private Limited
Governance
• Is your billing timely?
• What is the mode of receipt?
• Are you collecting on time? .. Advance/upfront?
• Is there an MIS to monitor performance; Health
check is not a one-time exercise, it is periodic.
More on MIS at Small Data .. not just ..Big Data – Part 1 :
Check Appendix 1
These basics are often ignored..
16
VentureBean Consulting Private Limited
Valuation
• Identify valuation methods and drivers in your
industry
– Number of customers?
– Revenue?
– GMV?
– Number of unique views?
– Average revenue per customer?
– Profitability?
– Cash Flow generated?
– Combination of above?
– Other?
• What could be
– Value drivers
– Value depleters
17
VentureBean Consulting Private Limited
Valuation
• Valuation is based on
– intangibles and
– tangibles
• Valuation is often computed as a multiple of
– Revenue
– EBIDTA
– PAT
– Cash Flow
– Capacity/Quantity
– Key value driver for industry; this changes from time to
time; especially in initial stages of industry development
(i.e. page views; user base, clicks etc..)
18
VentureBean Consulting Private Limited
Valuation
• At the start value is mostly intangible, look at
how this can be made tangible..
• For eg. service – through content, follow up
calls, showcasing feedback, etc.
• Can you think of how you can demo value in
early days of your business
19
VentureBean Consulting Private Limited
Valuation
Some examples of value demonstrated:
• Association with credible organisations (incubation, acceleration etc..)
• Team: Reputed/trustworthy; experienced/multi-disciplinary
• Marquee/discerning customers
• Other stakeholders associated – Advisors, investors, bankers, well
known professional service firms etc.
• Feedback/testimonials from reputed persons
• Ability to charge premium pricing
• Ability to address a huge market – i.e. ecommerce companies, value
without profits
For more: 5 Points on Valuation and Negotiations… OR … how You can get
a better price
20
VentureBean Consulting Private Limited
Other Aspects to consider
• Are You Ready for Growth and getting into the
Next Orbit, all rockets do not get to next stage,
some fall back into this orbit. Think through:
– Stepping out of comfort zone
– Execution issues
– Risk of failure
– Leading a larger company, ability to let go
– Inclination to grow into next level of leadership
21
VentureBean Consulting Private Limited
In Summary
• Thank you for the patient hearing
• Delighted to invite you to view/follow for periodic insights,
class notes & more, from thought leaders, academicians…
@ The VentureBean K.Hub: (Knowledge Hub)
http://www.linkedin.com/company/venturebean-consulting-
private-limited
www.slideshare.net/anjanavivek
https://twitter.com/VentureBean
• Contact for more information and inputs:
beanie@venturebean.com
22
VentureBean Consulting Private Limited
Appendix 1- Sample MIS items
• Quantity of Revenue: Sales amount - Invoices raised for the month
• Quality of revenue : (Illustrative)
– Per lines of business (i.e. SBUs/product varieties/Service Offerings etc.)
– Franchise/own/other models
– Location/National/International
– No of clients/customers billed
– New clients added / Repeat clients
– Cash inflow for the month from sales
– Write/off i.e. non payment by customers
– Customers attrition
– Pipeline customers – order book
• Expenses – key heads and total monthly expense;
• Cash balances, cash inflow and cash outflow
• Unusual events and impact, eg. sale of land in the period reported
• … AND so on
• Add a couple of points explaining any increase/decrease; i.e.
management comments/observations and next steps needed
23
VentureBean Consulting Private Limited
Thank You!
24

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Growth and Value Creation

  • 1. Business Models: Growth & Value Creation MasterClass @ Microsoft Ventures Bangalore, 8th April 2015 Anjana Vivek; anjana@venturebean.com
  • 2. VentureBean Consulting Private Limited Business Models – A Brief Introduction Stock Take – At the Start Growth: Sales and Beyond Sales Valuation and Value Creation Other Aspects to Consider Appendix Agenda 2 2
  • 3. VentureBean Consulting Private Limited WHAT IS A BUSINESS MODEL • Business model From Wikipedia, the free encyclopedia A business model describes the rationale of how an organisation creates, delivers, and captures value (economic, social, or other forms of value). The process of business model construction is part of business strategy. 3
  • 4. VentureBean Consulting Private Limited EXAMPLES OF INDIAN COMPANIES… Where the business model was different from those existing at that point in time: • Bharti Airtel • Big Bazaar • RedBus • Café Coffee Day 4
  • 5. VentureBean Consulting Private Limited Business Model Canvas: 9 building blocks BUSINESS MODEL CANVAS (BMC) • Customer segments • Value propositions • Channels • Customer relationships • Revenue streams • Key resources • Key activities • Key partnerships • Cost structures SOURCE:http://www.businessmodelgeneration.com/canvas • Acknowledgements: – Wikipedia, the free encyclopedia – http://www.businessmodelgeneration.com – http://www.businessmodelhub.com – Alexander Osterwalder 5
  • 6. VentureBean Consulting Private Limited AT THE START • Stock Take of where you are today: – Revenue – Number of offices – Employees – Lines of business/products/service – Kinds of customers / categories – Key Cost elements – etc.. • Create an MIS that you can work with; for eg. to manage your health & wellness you start with measuring a few key parameters like Weight (vs. age); Lipid Profile, Sugar Count, Blood Pressure.. 6
  • 7. VentureBean Consulting Private Limited AT THE START – Plans/Goals/Vision • Are you able to articulate what your business is about in 1-2 sentences 7
  • 8. VentureBean Consulting Private Limited Next Setting Goals/Targets: Planning • In 3 dimensions of time: short term, medium term and long term – Dream: For the long term.. dreams and aspirations drive you and the business – Launchpad: For the short term, details are easier to think through, assumptions are fewer – Directional: For the medium term it is more of guess work and trend analysis and less of data • It is good to periodically go back and forth between these time zones and check for patterns, consistency, thought process.. 8
  • 9. VentureBean Consulting Private Limited Setting Goals/Targets Planning for Alternate scenarios for eg: • Funded/Non-Funded/Boot-strap • Pessimistic, realistic and optimistic • With alternate business models; impacting strategy and cash flow • And more.. 9
  • 10. VentureBean Consulting Private Limited Growth Key Growth Parameters • Sales / Customers • Profit • Cash-flow • Other such as employees; multiple city branches; retail outlets etc. • .. etc • Value 10
  • 11. VentureBean Consulting Private Limited Sales: Analysis • Segments – B2B – B2C – Retail – online etc. – Analyse % of sales and quantity of sales in each category (as applicable) • What are the activities to reach out and get revenue from each of these segments? 11
  • 12. VentureBean Consulting Private Limited Sales: Analysis • Review findings – Where is maximum sales coming from? – Where is maximum effort made for sales? – Are you spreading yourself too thin? – Are you missing out on low hanging fruit? • Can you tweak your sales plan? • Can you target segment-by-segment sales in a phased manner? • Can you unbundle and bundle offerings to be more meaningful? • Go beyond sales, where is value to customer, where is value perceived by customer? 12
  • 13. VentureBean Consulting Private Limited Sales: More analysis • Sales – Quantity (In numbers; in amount) • Sales – Quality: for example – category A customers – ie Customers with revenue over Rs.1000 cr; MNCs; listed companies; premier organisations etc.. – Number of high value customers – Percentage of revenue from top few custumers – in terms of product/service/vertical/location etc • Customers churn/T.O : lost and gained in a period • Average revenue per customer • Profitability: segment-category wise • Pricing plans, alternates, for differently bundled offerings 13
  • 14. VentureBean Consulting Private Limited Sales Pipeline • Categorise and list names as: – Existing/Existing Biz – Existing/New Biz – New Customers/New Biz – Not yet on horizon (particularly when you are looking at sales forecast say 6 months from today, some potential customers may not yet be on horizon 14
  • 15. VentureBean Consulting Private Limited Sales Pipeline • How can you increase the pipeline funnel – List network contacts – Cold calls – move out of your comfort zone and set ambitious/aggressive targets: for eg. how can you double number of meetings this week – .. etc..other? • Periodically review sales/marketing strategy and execution with results.. i.e. track performance with activity • What could be barriers to sales growth; how can you overcome these? 15
  • 16. VentureBean Consulting Private Limited Governance • Is your billing timely? • What is the mode of receipt? • Are you collecting on time? .. Advance/upfront? • Is there an MIS to monitor performance; Health check is not a one-time exercise, it is periodic. More on MIS at Small Data .. not just ..Big Data – Part 1 : Check Appendix 1 These basics are often ignored.. 16
  • 17. VentureBean Consulting Private Limited Valuation • Identify valuation methods and drivers in your industry – Number of customers? – Revenue? – GMV? – Number of unique views? – Average revenue per customer? – Profitability? – Cash Flow generated? – Combination of above? – Other? • What could be – Value drivers – Value depleters 17
  • 18. VentureBean Consulting Private Limited Valuation • Valuation is based on – intangibles and – tangibles • Valuation is often computed as a multiple of – Revenue – EBIDTA – PAT – Cash Flow – Capacity/Quantity – Key value driver for industry; this changes from time to time; especially in initial stages of industry development (i.e. page views; user base, clicks etc..) 18
  • 19. VentureBean Consulting Private Limited Valuation • At the start value is mostly intangible, look at how this can be made tangible.. • For eg. service – through content, follow up calls, showcasing feedback, etc. • Can you think of how you can demo value in early days of your business 19
  • 20. VentureBean Consulting Private Limited Valuation Some examples of value demonstrated: • Association with credible organisations (incubation, acceleration etc..) • Team: Reputed/trustworthy; experienced/multi-disciplinary • Marquee/discerning customers • Other stakeholders associated – Advisors, investors, bankers, well known professional service firms etc. • Feedback/testimonials from reputed persons • Ability to charge premium pricing • Ability to address a huge market – i.e. ecommerce companies, value without profits For more: 5 Points on Valuation and Negotiations… OR … how You can get a better price 20
  • 21. VentureBean Consulting Private Limited Other Aspects to consider • Are You Ready for Growth and getting into the Next Orbit, all rockets do not get to next stage, some fall back into this orbit. Think through: – Stepping out of comfort zone – Execution issues – Risk of failure – Leading a larger company, ability to let go – Inclination to grow into next level of leadership 21
  • 22. VentureBean Consulting Private Limited In Summary • Thank you for the patient hearing • Delighted to invite you to view/follow for periodic insights, class notes & more, from thought leaders, academicians… @ The VentureBean K.Hub: (Knowledge Hub) http://www.linkedin.com/company/venturebean-consulting- private-limited www.slideshare.net/anjanavivek https://twitter.com/VentureBean • Contact for more information and inputs: beanie@venturebean.com 22
  • 23. VentureBean Consulting Private Limited Appendix 1- Sample MIS items • Quantity of Revenue: Sales amount - Invoices raised for the month • Quality of revenue : (Illustrative) – Per lines of business (i.e. SBUs/product varieties/Service Offerings etc.) – Franchise/own/other models – Location/National/International – No of clients/customers billed – New clients added / Repeat clients – Cash inflow for the month from sales – Write/off i.e. non payment by customers – Customers attrition – Pipeline customers – order book • Expenses – key heads and total monthly expense; • Cash balances, cash inflow and cash outflow • Unusual events and impact, eg. sale of land in the period reported • … AND so on • Add a couple of points explaining any increase/decrease; i.e. management comments/observations and next steps needed 23
  • 24. VentureBean Consulting Private Limited Thank You! 24

Editor's Notes

  1. Ecommerce – experimenting with pricing of arts and craft items: increase/decrease price/unbundling impact
  2. Eg. Of service company with customers giving few K to few Lakhs; changed/pruned Eg of travel company offering few hundreds savings to customers who spent thousands on stay/travel; i.e customer not price conscious would not value this; a home segment computer/laptop buyer will value service, not a corporate customer; unbundle offerings
  3. Eg. Of service company with customers giving few K to few Lakhs; changed/pruned Eg of travel company offering few hundreds savings to customers who spent thousands on stay/travel; i.e customer not price conscious would not value this; a home segment computer/laptop buyer will value service, not a corporate customer; unbundle offerings
  4. For eg IT services used to look at offshore/onshore break-up one time; offsite/onsite; country-wise; Indian/Export
  5. Value + : eg. Quality of service – how is this defined/established Value deplete :negative investor commentcustomer backlash)