Envisage. Stratigize. Execute: IDEA to BUSINESS

Anjana Vivek; beanie@venturebean.com
Envisage. Strategize. Implement.
Taking an Idea to a Business
Eximius @ IIMB
5th August 2017
Bengaluru

VentureBean Consulting Private Limited
Envisage: At the start
Envisage: The Business Model Canvas
Strategize: Setting Goals and Planning
Strategize: Business Plan & Funding Strategy
Implement: Governance: Periodic Stock Take
Implement: Illustrative areas: Sales and Valuation
Agenda
2 2

AS YOU START
Do take time out to think/reflect…
• WHAT are the strengths
– That you Can bring to your venture
– How can you bring this to your venture
• WHAT are constraints to either
– Address or
– Accept (and work keeping this in mind)
3

AT THE START
Reflect on your idea/solution …
• WHO can benefit from this?
– Is this actually going to be of help? How?
• WILL they pay you for this?
– Can this payment come more than once, repeatedly?
• HOW will you sell this?
– Pricing and profitability are also to be factored.
4

SNAPSHOT VIEW
• Can you explain to a stranger in 1
minute what your business/idea is
about? Please articulate this in 1-2
sentences
• Test with a couple of persons and see if it
appeals to them and if you are satisfied.
5

Agenda
6 6

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.
7

8

BMC: 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
• You may like to think through the elements of the BMC for your venture
9

EXAMPLES
• Direct sales
• Brick and mortar
• B2B
• B2C
• Freemium
• Franchising
• etc…
Can you think of some more?
10

Agenda
11 11

Setting Goals and Planning
• Plan in 3 dimensions of time: short term,
medium term and long term
– Long term: dreams and aspirations drive you and the
business
– Short term: details are easier to think through,
assumptions are fewer
– Medium term : more of guess work and trend
analysis and less of data
• It is good to periodically go back and forth
between these time horizons...
12

Setting Goals/Targets
Planning for Alternate scenarios for eg:
• Funded/Non-Funded/Boot-strap
• Pessimistic, realistic and optimistic
• With rapid expansion versus a slower growth mode
• With alternate business models; impacting strategy
and cash flow
• And more..
13

Other Aspects
• Are You Ready for Change/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
– Financial challenges
– Leading a larger company, ability to let go
– Inclination to grow into next level of leadership
14

Agenda
15 15

Business Plan
• An output based on business model and
strategy, expected to evolve over time
• To be forward looking, based on past knowledge
of promoters and their work experience in the
existing or new venture
• Assumptions to be tested to see if they will be
valid for execution, i.e. to demonstrate this is not
a business plan on paper alone
• Risks to be factored in plan
• Multiple scenarios are looked at, revenues
expected are discounted, expected costs and
expected cash flows factored, sensitivity to key
parameters checked

Seeking equity investment? Must haves…
• High upside potential
• Potential for extraordinary returns to investor
• Exit route plan to provide the returns to investor
• This implies – Rapid Growth, i.e.
– Total addressable market is really high
– Company has Potential to address this market
– Company has Ambition to address this market
– Company has Capability to Execute to achieve high growth
– Risks are articulated
– .. Etc
MUST Have Key Requirements:
• TEAM with Execution Capability and
• Huge Addressable Market

Investors: One Slide Checklist
• HNIs, informal and formal angel groups
• Seed Funds
• Venture Capital
• Private Equity
• Banks exploring innovative ways to fund SMEs
• Strategic Investors
• Corporate Funds; (Family) Business Groups, Indian & Global
– Directly and/or through a special division or subsidiary
– For employees alone or open to public
– As intellectual and/or financial capital with other facilities
• Government supported funds
• Impact Investors
• Incubators
• Accelerators
• Co-Creators
• Crowd funding
• Online funding platforms
18
Which
One
Could be
the
…
Right
Fit
for
your
Venture?

What Investors Look for
• INVESTOR FIT: Mandate and Fund Philosophy,
stage of investment cycle, other portfolio companies
• Team: Education, Experience, Multi-disciplinary, co-
founder team cohesiveness
• Past Track, of team members both in and before this
venture, of business
• Idea/Business Growth and history thus far, ability for
growth and sustainability
• Competitive Scenario
• Financial plan and funding strategy

Due diligence reviews (DDR)
Investment decision is based on DDR, some
illustrative reviews are below. Some of these or
aspects of these may be done in-house by the
investor, others may be out-sourced to experts and
professionals:
• Business
• Market
• Accounting
• Tax and Legal
• Technical
• HR

An Illustrative Sales Quality Review..
• Illustrative indicative parameters, for DDR
– Sales Quantity
– Quality of revenue - in terms of
product/service/vertical/location etc.
– Average revenue per employee
– Number of customers, number of high value
customers
– New customers added
– Customers lost
– Pipeline customers
– Customer acquisition strategy
21

A BUSINESS PLAN COMMUNICATES…
• Many times, a reader’s perception of your
business/idea will be based on the business
plan you prepare
• Different persons will look for different things, a
banker will check if a loan can be repaid, the
VC will look for value multiples on exit
• Substance and form matter, more so, when
hundreds of plans are reviewed
22

BUSINESS PLAN
• Should be self speaking: ie with limited
clarification required (including with regard to
abbreviations & technical terms)
• Reader friendly: Key information that you want
to convey should not be hidden amongst too
much details
Do not think only of what you want to share,
rather think about what your potential reader
may want to know
23

IN SUMMARY: Business Planning
As an entrepreneur
• What are your strengths/weaknesses?
• What do you like to do or think you like to do?
• What do you think you are good in?
• How would you bring this into your business?
As a business
• Have you thought about the business model?
• Have you thought about the soft issues such as team
dynamics, roles and responsibilities, leadership plan?
• Have you thought about your business plan structure?
• Have you thought about how you will pitch your plan?
24

Agenda
25 25

AT THE START
• Stock Take of key financial and non-financial
parameters (for example) :
– Product/service offerings
– Revenue, both quantity and value
– Customer categories
– Employees, technical and non-technical
– Kinds of customers / categories
– Key cost elements
– Balance in bank accounts
– Advisors on board
– Number/category of investors
– etc..
26

Monitor Growth Parameters
Illustrative:
• Sales / Customers
• Profit
• Cash-flow
• Other such as employees; multiple city branches; retail
outlets etc.
• .. etc
• Value?
27

Periodic Stock Take
• A well prepared MIS/Flash report is a great tool to
support decision making and enable any course
correction required.
• It will capture the flavor of your company and the
industry sector in which it operates.
• Some items are monitored more regularly than
others, for example, cash (which includes Bank
Balances) is monitored on daily basis. Sales and
some costs may be monitored on a monthly basis.
You design and monitor this.. it is Your Report of
Your Business Health
28

Agenda
29 29

Product/Service Offerings: Analysis
LOOKING INSIDE
• Product Lines
• Service Lines
• Combination solutions (product/service)
– bring some tangible into the intangible
– tangibilise the intangible;
• Pricing – an art and science
• Costing – math with assumptions
30

Sales (Plan): Analysis
LOOKING OUTSIDE
• 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?
31

Sales (Plan): Analysis
• Review findings / Revisit plans
– 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?
• What is your pricing strategy?
• Go beyond sales, where is value to customer, where
is value perceived by customer?
32

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
33

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
– Social media, website tweak... 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?
34

Sales Collection: Governance
• Is your billing timely?
• What is the mode of receipt?
• Are you collecting on time? .. Advance/upfront?
These basics are often ignored..
35

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
36

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..)
37

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
38

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?? Sustainable or not?
For more: 5 Points on Valuation and Negotiations… OR … how You can get
a better price
39

In Summary
• Thank you for the patient hearing
• Additional information/articles/resources at: @ The
VentureBean K.Hub: (Knowledge Hub)
• www.slideshare.net/anjanavivek : Content TOP 4%; 5%
Viewed 2013;2014
• http://www.linkedin.com/company/venturebean-
consulting-private-limited
• https://in.linkedin.com/in/anjanavivek
• https://twitter.com/VentureBean
• Email to : beanie@venturebean.com
40

Thank You!
41

Envisage. Stratigize. Execute: IDEA to BUSINESS

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