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Copyright
DKParker, LLC
2015
Models & Methods
Dave Parker
@DaveParkerSEA
www.dkparker.com
Dave@dkparker.com
“Big E Entrepr...
Copyright
DKParker, LLC
2015
Agenda
¤  About Dave
¤  Marketing Methods
¤  Sales Models
¤  Pricing Methods
¤  Business...
Copyright
DKParker, LLC
2015
About Dave
¤  CEO Code Fellows
¤  5X Entrepreneur
¤  SVP Programs at UP Global (Startup We...
Copyright
DKParker, LLC
2015
Two Methods + Three Models
¤  Marketing Methods – are mechanics to be tested
¤  Pricing Met...
Copyright
DKParker, LLC
2015
Why?
¤  Doing a financial model requires Data & #’s for:
¤  Marketing Methods
¤  Pricing M...
Copyright
DKParker, LLC
2015
Example
Copyright
DKParker, LLC
2015
Marketing Methods
Copyright
DKParker, LLC
2015
How many of
you are
planning Virality
as a driver of
your model?
Copyright
DKParker, LLC
2015
5 reasons you won’t go viral
1.  Viral & Network effect is a B2C marketing method
calculated ...
Copyright
DKParker, LLC
2015
What you can do
¤  Clear product positioning = word of mouth. Can your
message be repeated t...
Copyright
DKParker, LLC
2015
SAM
TAM
SOM
LAM
LAM – Launch
Addressable Market.
Who can buy your
product at MVP?
Market Sizi...
Copyright
DKParker, LLC
2015
Marketing Channels and Metrics
What are your core assumptions for marketing?
¤  Track all Ma...
Copyright
DKParker, LLC
2015
Customers (10)
SEO
Inbound
Outbound
Marketing
Channels
Leads
1,000
Prospects
100
Copyright
DKParker, LLC
2015
Pricing Methods
Copyright
DKParker, LLC
2015
You can sell
anything for
nothing
Copyright
DKParker, LLC
2015
Pricing
¤  What do you need to charge to cover:
¤  Cost of build
¤  Cost of Sale
¤  Profi...
Copyright
DKParker, LLC
2015
Sales Models
Copyright
DKParker, LLC
2015
Someone has
to sell your
product – let’s
start with you
Copyright
DKParker, LLC
2015
Sales Models
¤  Web Direct – Advertising and conversion based sales, sales
support?, require...
Copyright
DKParker, LLC
2015
Known
Market
Unknown
Market
Low Price
Point
High Price
Point
Known Search
Words
Unknown
Searc...
Copyright
DKParker, LLC
2015
Sales Model Assumptions
The following apply regardless of models
¤  Cost of Customer Acquisi...
Copyright
DKParker, LLC
2015
Business Models
Copyright
DKParker, LLC
2015
Who is your customer?
Who Pays?
¤  Business to Business (B2B)
¤  Business to Consumer (B2C)...
Copyright
DKParker, LLC
2015
9 B2B Business Models
Copyright
DKParker, LLC
2015
9 B2B Models
¤  B2B Commerce - Example Grainger
¤  Grainger is a wholesale supply company w...
Copyright
DKParker, LLC
2015
9 B2B Models
¤  Search – Example Google
¤  Yahoo was first in the PPC business. Search is a...
Copyright
DKParker, LLC
2015
9 B2B Models
¤  Productize a Service - Example MOZ - detailed post
¤  Services business (Co...
Copyright
DKParker, LLC
2015
9 B2B Models
¤  Transaction Fees - Example Square
¤  Square launched with a replacement for...
Copyright
DKParker, LLC
2015
9 B2B Models
¤  Combination - Example Uber
¤  Uber is a business that created a marketplace...
Copyright
DKParker, LLC
2015
Other Models – ONLY at Scale
¤  Nonprofit - Example Startup Weekend
¤  Big Data Sales – Dat...
Copyright
DKParker, LLC
2015
Financial Models
Copyright
DKParker, LLC
2015
To the Spreadsheets!
¤  These details manifest in assumptions
¤  Time based
¤  Launch
¤  ...
Copyright
DKParker, LLC
2015
Just say “no” to $100M!
¤  Avoid the Top 10 Fails Fundraising
¤  Bottom Up vs. Top Down Mod...
Copyright
DKParker, LLC
2015
Q&A – Your Metrics & Models
Copyright
DKParker, LLC
2015
dave@dkparker.com
http://dkparker.com/
businessmodels/
@DaveParkerSEA
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9 Business to Business (B2B) Startup Business Models

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Your startup idea is unique - but the business model isn't unique. What can you learn from established fast growth startup companies? The models and key metrics they use to monetize their ideas.

learn more about your revenue models and how they compare to other peer & competitor companies at www.lumeric.com

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9 Business to Business (B2B) Startup Business Models

  1. 1. Copyright DKParker, LLC 2015 Models & Methods Dave Parker @DaveParkerSEA www.dkparker.com Dave@dkparker.com “Big E Entrepreneurship”
  2. 2. Copyright DKParker, LLC 2015 Agenda ¤  About Dave ¤  Marketing Methods ¤  Sales Models ¤  Pricing Methods ¤  Business Models ¤  Financial Models ¤  Q&A – Your models
  3. 3. Copyright DKParker, LLC 2015 About Dave ¤  CEO Code Fellows ¤  5X Entrepreneur ¤  SVP Programs at UP Global (Startup Weekend + Startup America) ¤  EIR at Mitsui Venture Capital ¤  Board member for three mid-market, handful of startups and advisory board for over 50+ startup companies ¤  Husband, Dad
  4. 4. Copyright DKParker, LLC 2015 Two Methods + Three Models ¤  Marketing Methods – are mechanics to be tested ¤  Pricing Methods – how to price your product ¤  Sales Models – how you SELL your product. ¤  Business Models – are the way to monetize, including key metrics ¤  B2B ¤  B2C ¤  Financial Models – include revenue and expenses. Used for both forecast and actual
  5. 5. Copyright DKParker, LLC 2015 Why? ¤  Doing a financial model requires Data & #’s for: ¤  Marketing Methods ¤  Pricing Methods ¤  Sales Model ¤  Business Model
  6. 6. Copyright DKParker, LLC 2015 Example
  7. 7. Copyright DKParker, LLC 2015 Marketing Methods
  8. 8. Copyright DKParker, LLC 2015 How many of you are planning Virality as a driver of your model?
  9. 9. Copyright DKParker, LLC 2015 5 reasons you won’t go viral 1.  Viral & Network effect is a B2C marketing method calculated as “K Factor” k = invites sent * conversion 2.  No inherent virality in your offering – nothing to share with other people, e.g. Facebook or WhatsApp 3.  No collaboration virality – extending your offering 4.  Your target market is too small (TAM/SAM/LAM) 5.  Budget and Creative - No “me-too” approach will work
  10. 10. Copyright DKParker, LLC 2015 What you can do ¤  Clear product positioning = word of mouth. Can your message be repeated to their boss? ¤  Make your product more valuable over time <REALLY?> ¤  MVP vs. KAP “Kick Ass Product” ¤  Free trial is different from Freemium ¤  Corporate users will expense a service below a specific price point ¤  What the conversion % to paid is the question you will have to answer
  11. 11. Copyright DKParker, LLC 2015 SAM TAM SOM LAM LAM – Launch Addressable Market. Who can buy your product at MVP? Market Sizing
  12. 12. Copyright DKParker, LLC 2015 Marketing Channels and Metrics What are your core assumptions for marketing? ¤  Track all Marketing by channel and $$ spend ¤  Paid, SEO, etc. ¤  Cost to create leads (traffic) ¤  Cost (effort) and % convert to prospects ¤  Cost (effort) and % convert to customers
  13. 13. Copyright DKParker, LLC 2015 Customers (10) SEO Inbound Outbound Marketing Channels Leads 1,000 Prospects 100
  14. 14. Copyright DKParker, LLC 2015 Pricing Methods
  15. 15. Copyright DKParker, LLC 2015 You can sell anything for nothing
  16. 16. Copyright DKParker, LLC 2015 Pricing ¤  What do you need to charge to cover: ¤  Cost of build ¤  Cost of Sale ¤  Profit Expectation = Cash flow ¤  Value based pricing – don’t start too low ¤  One time or recurring? ¤  Bundled pricing (Services+) ¤  “Mystery of Product Pricing”
  17. 17. Copyright DKParker, LLC 2015 Sales Models
  18. 18. Copyright DKParker, LLC 2015 Someone has to sell your product – let’s start with you
  19. 19. Copyright DKParker, LLC 2015 Sales Models ¤  Web Direct – Advertising and conversion based sales, sales support?, requires customers to search and find ¤  Direct – internal sales people (Inside or Outside), # of deals/ Month, salary + commissions ¤  Distribution/Channel Sales – Indirect or external, <# of deals/ Month, no Salary, just commission <Mindshare. Fulfill demand, don’t create demand ¤  White Label Sales/Licensing – infrastructure or license sales, long sales cycle, few but targeted customers ¤  Retail – Product on shelves - N/A
  20. 20. Copyright DKParker, LLC 2015 Known Market Unknown Market Low Price Point High Price Point Known Search Words Unknown Search words Web Direct ✔ ✔ ✔ Direct ✔ ✔ ✔ ✔ ✔ Indirect ✔ ✔ ✔ Licensing ✔ ✔ Retail
  21. 21. Copyright DKParker, LLC 2015 Sales Model Assumptions The following apply regardless of models ¤  Cost of Customer Acquisition (CAC) ¤  Lifetime value of Customer (LTV) ¤  Typically 36 month calculation ¤  Time to close sale ¤  How does this change with product/market maturity? ¤  Churn/Retention
  22. 22. Copyright DKParker, LLC 2015 Business Models
  23. 23. Copyright DKParker, LLC 2015 Who is your customer? Who Pays? ¤  Business to Business (B2B) ¤  Business to Consumer (B2C) ¤  Business to Government (B2G) ¤  At launch you get one, at scale you can have a number
  24. 24. Copyright DKParker, LLC 2015 9 B2B Business Models
  25. 25. Copyright DKParker, LLC 2015 9 B2B Models ¤  B2B Commerce - Example Grainger ¤  Grainger is a wholesale supply company with a $15B market cap. This ordering site shifted the expense of ordering from their counter to the customer. ¤  Subscription - Example Salesforce.com - detailed post ¤  There are so many great examples now of B2B subscriptions; I wanted to highlight one of the frontrunners in Salesforce. One of the things they did that was masterful was recruited sales people directly (cheap for 5 users or less) who would then expense it back to their company.
  26. 26. Copyright DKParker, LLC 2015 9 B2B Models ¤  Search – Example Google ¤  Yahoo was first in the PPC business. Search is a free consumer service paid for by advertisers – targets action or intention. ¤  Advertising – Example Facebook ¤  Monetizing eyeballs. Need to start with 1M uniques to be fundable. Cost per Thousand (CPM) on Banners can target demographic vs. intention.
  27. 27. Copyright DKParker, LLC 2015 9 B2B Models ¤  Productize a Service - Example MOZ - detailed post ¤  Services business (Consulting) usually generates 35%+ Gross Margin. Given that pull of profit $, very few companies make the shift from services company to product company. ¤  Marketplace - Example Alibaba ¤  Nearly everyone has used eBay or similar. Alibaba's IPO and global presence is what people know it for in 2015. But this marketplace was founded in 1999.
  28. 28. Copyright DKParker, LLC 2015 9 B2B Models ¤  Transaction Fees - Example Square ¤  Square launched with a replacement for credit cards like PayPal and take a percentage of every transaction as their payment. They've since expanded into Point of Sales (POS) services. ¤  Lead Generation - Example Mint ¤  Consumers are the product to whom Lead Generation companies are selling. They are a business that sells other businesses (consumer) leads. They are paid for the lead, not a transaction. Sometimes this is a great customer experience like Mint, but with others, like Insurance, it's a bad customer experience.
  29. 29. Copyright DKParker, LLC 2015 9 B2B Models ¤  Combination - Example Uber ¤  Uber is a business that created a marketplace that innovated around transaction fees (the driver doesn't control the price like an eBay seller).
  30. 30. Copyright DKParker, LLC 2015 Other Models – ONLY at Scale ¤  Nonprofit - Example Startup Weekend ¤  Big Data Sales – Data Analytics ¤  Multisided Marketplace – Etsy, Zarly ¤  Panels – ability to interview panel of customers or pay for Access. Examples: PatientsLikeMe, Toluna ¤  B2B2C – please don’t hurt yourself…
  31. 31. Copyright DKParker, LLC 2015 Financial Models
  32. 32. Copyright DKParker, LLC 2015 To the Spreadsheets! ¤  These details manifest in assumptions ¤  Time based ¤  Launch ¤  Ramp ¤  Scale ¤  Market & Brand Development ¤  Pricing ¤  Overtime
  33. 33. Copyright DKParker, LLC 2015 Just say “no” to $100M! ¤  Avoid the Top 10 Fails Fundraising ¤  Bottom Up vs. Top Down Model ¤  Find a proxy for your business model “Like this for that”
  34. 34. Copyright DKParker, LLC 2015 Q&A – Your Metrics & Models
  35. 35. Copyright DKParker, LLC 2015 dave@dkparker.com http://dkparker.com/ businessmodels/ @DaveParkerSEA
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Your startup idea is unique - but the business model isn't unique. What can you learn from established fast growth startup companies? The models and key metrics they use to monetize their ideas. learn more about your revenue models and how they compare to other peer & competitor companies at www.lumeric.com

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