BUSINESS MODEL 1 Units Sold
1,000,000 Price per unit $1 Monthly Revenue 1,000,000 Monthly Cost 990,000 Monthly Profit 10,000 Profit Margin 1% BUSINESS MODEL 2 Units Sold 100,000 Price per unit $1 Monthly Revenue 100,000 Monthly Cost 50,000 Monthly Profit 50,000 Profit Margin 50% a million in revenue for a million units sold doesn’t look so sexy now, does it?
margin = profit revenue =
(volume x price) – cost volume x price = revenue – cost revenue = (volume x price) – (volume x unit cost) volume x price Expand out profit to (r - c) Expand out revenue to (v x p) Expand out cost to (v x c)
margin = = = =
(volume x price) – (volume x unit cost) volume x price volume x (price – unit cost) volume x price price – unit cost price From the last slide Simplify! price price unit cost price -
here is a tiny version
of what you’ll find on the next slide WARNING: you must manually use the scroll bars in order to use it
Cultivate Productive Assets Cultivate Productive
Assets Produce Product / Service Produce Product / Service Distribute Product / Service Distribute Product / Service Administrate Firm Administrate Firm Operational Activities are defined as a set of business processes required to execute business strategy. Not all firms will have the same activities but they probably all have the same core of 4 and most start-ups and small companies will not be all that far off. As a small company, you won’t have time to fix everything, but you should 1) know where you stand in terms of operational maturity (by mapping out processes as is the case here, and assigning maturity ratings) and 2) have a plan as to what things you will invest in improving. For example, you might target the “red” items in the map. Or you might find that you’ll get better ROI by focusing on 4 of the yellow processes. Whatever the case, this is an example map (scroll left, right, up and down to explore) of operational processes that seem generic enough to me that they might be useful as a baseline for whatever company you are running. Activities mature and working smoothly Activities are being performed, but there are opportunities to improve efficiency and/or effectiveness Activities are not being performed, but should be Activities are not being performed, but are not relevant for our business at this time Scroll to see processes! Scroll to see more!
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