Business 101.1 class 9 NYU ITP

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Income statements, balance sheets, cash flow for Business 101.1

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Business 101.1 class 9 NYU ITP

  1. 1. Business 101.1 A class in business. And entrepreneurship. Fall 2016 NYU ITP November 14, 2016 Josh Knowles Jen van der Meer Extra love from Tom Igoe And the Leslie E-Lab
  2. 2. Syllabus Map START + Form Teams Business Models Customer Development How to Interview Value + The Purpose of Business Values Motivation Team Customer Relationships + Channels Analytics Key Resources Activities Partners Biggest Vision Analyze Test The Money Plan MVP Turning Insights Into Features More MVP How small, How big? Launch MVP Lessons Learned Go/No Go? Sketch Paper Prototype Oz Test Smallest MVP Tech Architecture
  3. 3. THINGS CHANGED
  4. 4. THINGS CHANGED.
  5. 5. Business models are for people Business models are for people
  6. 6. Business model innovation in 5 hard steps Business model innovation in 5 hard steps
  7. 7. 1. Define your vision.
  8. 8. 1. Define your vision.
  9. 9. 2. Include People
  10. 10. 3. Search for the starter model that launches your vision
  11. 11. 4. Get out of the building.
  12. 12. Whom do you want to serve? What problem do you see?
  13. 13. ALWAYS START WITH THE CUSTOMER: Customer Segments Customer Relationships Value Proposition Key ActivitiesPartners Key Resources Customer Channels RevenuesCosts Source: Strategyzer Osterwalder, Pigneur Whom are you here to serve?
  14. 14. ALWAYS START WITH THE CUSTOMER: Get out of the building
  15. 15. ALWAYS START WITH THE CUSTOMER: Customer Segments Customer Relationships Value Proposition Customer Channels Source: Strategyzer Osterwalder, Pigneur VALUE? What problem do you see?
  16. 16. 5. Business model validation = ask for help
  17. 17. Ask for help GET OUT OF THE BUILDING
  18. 18. Customer Segments Customer Relationships Value Proposition Key ActivitiesPartners Key Resources Customer Channels RevenuesCosts Source: Strategyzer Osterwalder, Pigneur GET TO VALUE PROPOSITION FIT
  19. 19. TEST YOUR PROPOSITION WITH CUSTOMERS Validate with customers
  20. 20. Customer Segments Customer Relationships Value Proposition Key ActivitiesPartners Key Resources Customer Channels RevenuesCosts Source: Strategyzer Osterwalder, Pigneur AND THE REST OF THE BUSINESS MODEL WILL FOLLOW
  21. 21. Build your network
  22. 22. 1. Define your vision 2. Add people 3. Find your starter business model 4. Get out of the building 5. Ask for help
  23. 23. That’s how we’re going to get through this. That’s how we’re going to get through this.
  24. 24. THE MONEY
  25. 25. WHY DID THE MARKETS BOUNCE?
  26. 26. FOR FUN
  27. 27. HOW WILL YOU MAKE MONEY? YEAR ONE. JUST A HYPOTHESIS.
  28. 28. BALANCE SHEETS CASH FLOW INCOME STATEMENTS
  29. 29. Major Themes: How business generates profits or losses How to raise capital to start a company How to monetize your business investment
  30. 30. Major Themes: How business generates profits or losses How to raise capital to start a company How to monetize your business investment
  31. 31. Start a business: First we need to determine how much money (capital) we need to run our business. How much it costs to run our business on a monthly and yearly basis. If we have less revenue then expenses, what does that mean?
  32. 32. Major Tools: Balance Sheet Income Statement Cash Flow
  33. 33. Lemonade Inc. We are going to need money and a legal corporate entity to do it under. 1,000,000 Shares of Stock for $1 each to us the founders Sell another 500,000 Shares of Stock to an investor.
  34. 34. Lemonade Inc. Capitalization Table
 You $1,000,000 (67%) Investor $500,000 (33%) ____________________________________________ Company worth $1,500,000 (100%)
  35. 35. Lemonade Inc. Balance Sheet ASSETS Cash 500,000 you’ve raised Fixed Assets 0 Inventory 0 Goodwill 1,000,000 your $1 MM idea Total Assets 1,500,000 LIABILITIES Debt 0 Total Liabilities 0 Shareholder’s Equity 1,500,000 Per Share $1
  36. 36. Lemonade Inc. Fixed Assets 
 Tables and chairs
 Kitchen Equipment
 Computers/Cash Registers
 Signs
 
 Acquiring all these items cost us $50,000

  37. 37. ASSETS Cash 450,000 Fixed Assets 50,000 deduct from the cash Inventory 0 Goodwill 1,000,000 Total Assets 1,500,000 LIABILITIES Debt 0 Total Liabilities 0 Shareholder’s Equity 1,500,000 Per Share $1 Lemonade Inc. Balance Sheet
  38. 38. Water
 Lemons
 Sugar
 Cups
 Napkins
 Containers (to hold lemonade)
 
 We project we will sell 800 cups a day. The inventory above costs us $2.00 per cup. 800 cups X 30 days X $2 a cup = $48,000 Lemonade Inc. Inventory (Cost of Good Sold)
  39. 39. Lemonade Inc. Balance Sheet ASSETS Cash 402,000 Fixed Assets 50,000 Inventory 48,000 deduct from cash Goodwill 1,000,000 Total Assets 1,500,000 LIABILITIES Debt 0 Total Liabilities 0 Shareholder’s Equity 1,500,000 Per Share $1
  40. 40. We sell 800 cups a day for $4.50 a cup. 800 cups X 30 days X $4.50 a cup = $108,000 Lemonade Inc. OPEN FOR BUSINESS!! THIS STRATEGY = WHAT COMPANY?
  41. 41. Lemonade Inc. Income Statement REVENUE Cups sold per month 24,000 Price per cup $4.50 Revenue $108,000 UNIT ECONOMICS - LET’S FIGURE OUT HOW MUCH PER NEW CUP SOLD
  42. 42. Lemonade Inc. Income Statement REVENUE Cups sold per month 24,000 Price per cup $4.50 Revenue $108,000 EXPENSES COGS $48,000 Labor $ COST OF GOODS SOLD
  43. 43. Open 7 days a week, 8 hours a day
 8 hours x 7 days a week x 4 weeks= 224 hrs per position
 
 We pay, on average, $30.00 per hour per person. This includes health insurance, paid time off, retirement account contribution etc. We need 5 people at all times to properly run the business. 224 hours x $30.00/hrs x 5 people = $33,600 Lemonade Inc. Labor
  44. 44. Lemonade Inc. Income Statement Month 1 REVENUE Cups sold per month 24,000 Price per cup $4.50 GROSS REVENUE $108,000 EXPENSES COGS $48,000 Labor/Benefits $33,600 Marketing $10,000 Rent $10,000 Other $2,500 EBIT $3,900 Tax $1,365 NET INCOME $2,535
  45. 45. Gross Revenue $108,000 = 1.88% Net Income $2,035 Lemonade Inc. First Month Profit Margin HOW ARE WE DOING?
  46. 46. Lemonade Inc. With $500k investment You $1,000,000 (67%) Investor $500,000 (33%) ____________________________________________ Company worth $1,500,000 (100%)
  47. 47. Lemonade Inc. Balance Sheet ASSETS Cash 402,000 Fixed Assets 50,000 Inventory 48,000 Goodwill 1,000,000 Total Assets 1,500,000 LIABILITIES Debt 0 Total Liabilities 0 Shareholder’s Equity 1,500,000 Per Share 1 STILL HAVE 402K IN THE BANK
  48. 48. Lemonade Inc.
 You $200,000 (62.5%) Investor $120,000 (37.5%) ____________________________________________ Company worth $320,000 (100%) WHAT IF WE RAISED LESS?
  49. 49. Lemonade Inc. Balance Sheet ASSETS Cash 120,000 Fixed Assets 0 Inventory 0 Goodwill 200,000 Total Assets 320,000 LIABILITIES Debt 0 Total Liabilities 0 Shareholder’s Equity 320,000 Per Share $1 WE’D HAVE A VERY DIFFERENT BALANCE SHEET
  50. 50. Lemonade Inc. Balance Sheet ASSETS Cash 22,000 Fixed Assets 50,000 Inventory 48,000 Goodwill 200,000 Total Assets 320,000 LIABILITIES Debt 0 Total Liabilities 0 Shareholder’s Equity 320,000 Per Share $1 RUNNING LEAN. TOO LEAN?
  51. 51. Lemonade Inc. Balance Sheet ASSETS Cash 402,000 Fixed Assets 50,000 Inventory 48,000 Goodwill 1,000,000 Total Assets 1,500,000 LIABILITIES Debt 0 Total Liabilities 0 Shareholder’s Equity 1,500,000 Per Share 1 LET’S GO BACK TO OUR HIGHER CAPITALIZED STRUCTURE
  52. 52. Lemonade Inc. Balance Sheet ASSETS Cash 402,000 Fixed Assets 50,000 Inventory 48,000 Goodwill 1,000,000 Total Assets 1,500,000 LIABILITIES Debt 0 Total Liabilities 0 Shareholder’s Equity 1,500,000 Per Share $1 Costs about $100k 
 to start a new store LET’S ADD GROWTH
  53. 53. Lemonade Inc. Growth Assumptions Model out: Open 1 new store a year
 Increase price by 15 cents a year LOOK FOR STARBUCKS GROWTH ASSUMPTIONS
  54. 54. Lemonade Inc. Pro Forma Income Statement Year 1 2 3 4 5 REVENUE Cups sold per year 288,000 576,000 864,000 1,152,000 1,440,000 Price per cup 4.50 4.65 4.80 4.95 5.10 GROSS REVENUE 1,296,000 2,678,400 4,147,200 5,702,400 7,344,000 EXPENSES COGS 576,000 1,152,000 1,728,000 2,304,000 2,880,000 Labor/Benefits 403,200 806,400 1,209,600 1,612,800 2,016,000 Marketing 120,000 240,000 360,000 480,000 600,000 Rent 120,000 240,000 360,000 480,000 600,000 Other 30,000 60,000 90,000 120,000 150,000 EBIT 46,800 180,000 399,600 705,600 1,098,000 EBIT Margin 3.61% 6.72% 9.64% 12.37% 14.95% Tax 16,380 63,000 139,860 246,960 384,300 NET INCOME 30,420 117,000 259,740 458,640 713,700 Margin 2.35% 4.37% 6.26% 8.04% 9.72%
  55. 55. Lemonade Inc. Balance Sheet as of Dec 31st Year 1 2 3 4 5 ASSETS Cash 432,420 451,420 613,160 973,800 1,589,500 Fixed Assets 50,000 100,000 150,000 200,000 250,000 Inventory 48,000 96,000 144,000 192,000 240,000 Goodwill 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 Total Assets 1,530,420 1,647,420 1,907,160 2,365,800 3,079,500 LIABILITIES Debt 0 0 0 0 0 Total Liabilities 0 0 0 0 0 Shareholder’s Equity 1,530,420 1,647,420 1,907,160 2,365,800 3,079,500 Per Share 1.02 1.10 1.27 1.58 2.05 BY DOUBLING CASH YOU’VE DOUBLED SHAREHOLDER’S EQUITY
  56. 56. Lemonade Inc. Cash Flow Year 1 2 3 4 5 Cash Flow for Operations Net Income 30,420 117,000 259,740 458,640 713,700 Cash Flow from Investing Capital Expenditures 50,000 50,000 50,000 50,000 50,000 Cash Flow from Financing Money Borrowed (Debt) 0 0 0 0 0 Dividends Paid 0 0 0 0 0 New Shares Issued 0 0 0 0 0 Beginning Cash 0 -19,580 47,420 257,160 665,800 Change in cash -19,580 67,000 209,740 408,640 663,700 Ending Cash -19,580 47,420 257,160 665,800 1,329,500
  57. 57. Lemonade Inc. Measuring Growth 5th Year Earnings Yield - 47.58% return
 As of the 5th Year, the business is earning $713,000 on $1,500,000 invested.
  58. 58. Lemonade Inc. Measuring Growth Return on Invested Capital - 105% return
 As of the 5th Year, the business is earning $1,579,600 on $1,500,000 invested.
  59. 59. Lemonade Inc. Measuring Growth Earnings Growth - 14.99% per year
 Grew from $1.02 a share to $2.05 a share
  60. 60. Lemonade Inc. Measuring Growth Accelerating Profitability
  61. 61. Valuation Twitter:
 700,210,000 Shares X 17.49 = $12.25 Billion
  62. 62. Valuation Twitter:
 700,210,000 Shares X 17.49 = $12.25 Billion Lemonade Inc:
 1,500,000 Shares X 1.00 = $1,500,000
  63. 63. Pro Forma for Your Business! Income statement Balance sheet Cash Flow
  64. 64. Major Tools: Balance Sheet Income Statement Cash Flow
  65. 65. Lemonade Inc. We are going to need money and a legal corporate entity to do it under. 1,000,000 Shares of Stock for $1 each Sell another 500,000 Shares of Stock to an investor.
  66. 66. Lemonade Inc.
 You $1,000,000 (67%) Investor $500,000 (33%) ____________________________________________ Company worth $1,500,000 (100%)
  67. 67. Lemonade Inc. Balance Sheet ASSETS Cash 500,000 Fixed Assets 0 Inventory 0 Goodwill 1,000,000 Total Assets 1,500,000 LIABILITIES Debt 0 Total Liabilities 0 Shareholder’s Equity 1,500,000 Per Share $1
  68. 68. NEXT TIME
  69. 69. Start a business: First we need to determine how much money (capital) we need to run our business. How much it costs to run our business on a monthly and yearly basis. If we have less revenue then expenses, what does that mean?
  70. 70. END

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