Startnowhow 15.12.16 - Planning, Developing and Testing a Business Model

PLANNING, DEVELOPING AND TESTING A BUSINESS MODEL Dr. Joachim Behrendt

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StartNowHow

• Open seminar series for active and prospective entrepreneurs

• 10 sessions on monthly basis until summer 2017

• Covers relevant theoretical and practical aspects of entrepreneurship

• Based on lecture „entrepreneurship“ @Bogazici University

• Based on experiences of entrepreneurs, investors, mentors and consultants

• Each session with guest speaker (entrepreneurs, investors, mentors, etc.)

• Certificate provided for participants (from BIC Angels / Bogazici University Entrepreneurship Center) joining at least 70% of the sessions

• Language: English / Turkish

• Thursdays 17.15h – 19.30h

• Next session: Thu 12. January 2017

• Topic: Opportunity Recognition and Evaluation

• Early registration for each session required (eventbrite), limited capacity!

• Priority for regular participants

Startnowhow – Seminar 2 15.12.2016 2

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StartNowHow - Literature

• Bowers, Brent, 8 Patterns of Highly Effective Entrepreneurs, Doubleday, New York, NY 2008

• Bygrave, William D. / Zacharaiks, Andrew, The Portable MBA in Entrepreneurship, 4th ed., Wiley, Hoboken, NJ 2010

• Drucker, Peter F., Innovation and Entrepreneurship, 1st ed. 1985, reprinted 2010, Elsevier, Kiddlington, 2010

• Harper, Stephen C., Extraordinary Entrepreneurship: The Professional’s Guide to Starting an Exceptional Enterprise, Wiley, Hoboken, NJ 2005

• Hirshberg, Meg Cadoux, For Better or for Work, All Inc., New York, NY 2012

• Hisrich, Robert D. / Peters, Michael P. / Shepherd, Dean A., Entrepreneurship, 9th ed., McGraw-Hill, New York, NY 2012

• Kuratko, Donald F., Entrepreneurship: Theory, Process, Practice, 8th ed., South-Western, Mason, OH 2009

• Leach, J. Chris / Melicher, Ronald W., Entrepreneurial Finance, International Edition, 4th ed., South-Western, Hampshire 2012

• Osterwalder, Alexander / Pigneur, Yves, Business Model Generation, Wiley, Hoboken, NJ 2010

• Ries, Eric, The Lean Startup, Crown Business, New York, NY 2011

• Smith, Janet Kiholm / Smith, Richard L. / Bliss, Richard T., Entrepreneurial Finance – Strategy, Valuation, and Deal Structure, Standford University Press, Stanford, CA 2011

• Stokes, David / Wilson, Nick, Small Business Management and Entrepreneurship, 6th ed., South-Western, Hampshire 2010

• Taleb, Nassim Nicholas, The Black Swan – The Impact of the Highly Improbable, revised ed., Penguin, London 2010

• Timmons, Jeffry A. / Spinelli, Stephen, New Venture Creation – Entrepreneurship for the 21st Century, 9th ed., McGraw-Hill, New York, NY 2011


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StartNowHow - Seminar Topics (preliminary)

1. Thu 22.09.16: The entrepreneurial ecosystem in Turkey

2. Thu 20.10.16: Entrepreneurship as a profession

3. Thu 17.11.16: Financial planning for startups

4. Thu 15.12.16: Planning, developing and testing a business model

5. Thu 12.01.17: Opportunity recognition and evaluation

6. Thu 09.02.17: Market and competitor research

7. Thu 09.03.17: Funding the startup – stage financing for ventures

8. Thu 06.04.17: Startup valuation

9. Thu 04.05.17: The investment process – pitching, negotiations and termsheet

10. Thu 01.06.17: Success and failure as an entrepreneur


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EL What Is a Business Model?

• Core of the business plan, key element of the business plan - how will the venture create money?

• Definitions:

• „A business model explains how a venture is expected to create a profit“ (Fiet, J.O. / Patel, P.C., Forgiving Business Models for New Ventures, in: Management Science 48 (1), 2008, pp.105-121)

• „A business model describes the rationale of how an organization creates, delivers, and captures value.“ (Osterwalder, A. / Pigneur, Y., Business Model Generation, 2009, p.14)

• „A business model is a concise representation of how an interrelated set of decision variables in the areas of venture strategy, architecture, and economics are addressed to create sustainable competitive advantage in defined markets.“ (Morris, M.H. et. al., The Entrepreneur‘s Business Model: Towards Conceptualization, in: International Journal of Business Research 58 (6), 2005, pp. 726-735)

15.12.2016 5 Startnowhow – Seminar 4

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EL Types of Business Models


(adopted from Amit, R, / Zott, C., Value Creation in E-Business, in: Strategic Management Journal 22 (6/7),

2001, pp. 493-520)

Value Creation

Efficiency

Complementarity

Innovation Lock-In

• Innovation-centered business models: Create new possibilities for transactions among economic subjects – Example: Location-based mobile commerce

• Efficiency-centered business models: Increase efficiency for already existing transactions among economic subjects – Example: Use of internet in touristic industry, Amazon

• Lock-in-centered business models: Increase volume of existing transactions between existing economic subjects by binding them closer together – Example: 2-year-contracts for mobile phone usage and value-added services, Google search engine, Loyaltycard programs

• Complementarity-centered business models: Combining own services with complementary services for increasing attractiveness of transactions among economic subjects – Example: App stores, Computer + operating system bundle

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EL Characteristics of Superior Business Opportunities

• Added value

• Venture creates or adds significant value to a customer or end user

• Venture solves a significant problem

• Venture adds value by solving a significant problem, removing a serious pain, or meeting a significant want or need

• Someone is willing to pay a premium for solving this problem

• Venture has robust market, margin, and money-making characteristics

• Large enough market (min. 50 Mio $)

• High growth expectation (min. 20% p.a.)

• High gross margins (min. 40%)

• Strong and early cash flow (recurring revenue, low assets, low working capital)

• High profit potential (min. 10% - 15% after tax income)

• Attractive, realizable return for investors (Internal Rate of Return IRR min. 25% - 30%)

• Venture fits to skillset

• Good fit with founder(s) and managment team skills for that time and marketplace

• Attractive risk-reward balance

• Source: Timmons / Spinelli, New Venture Creation, p.150


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EL Design of Business Models


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EL Design of Business Models

• Cost Structure C$ - Resulting from cost contribution for building blocks of the business model:

• Key partners KP: Resources necessary for producing and offering the products / services, and to be purchased from outside

• Key resources KR: Necessary key assets for producing and offering products / services

• Key activities KA: Key activities to be performed for producing and offering the products / services

• Revenue Streams R$ - Resulting from successful offer of VP to the customer:

• Customer segments CS: Relevant customer segments to be served

• Customer relationships CR: Development and maintenance of relationships for each relevant CS

• Channels CH: Channels through which products / services will be offered to customers

• Value Proposition VP – Way in which organization will solve customer problems and fulfill customer needs by providing value-adding products / services

• (from: Osterwalder, A, Pigneur, Y., Business Model Generation, 2009)


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15.12.2016 10 Entrepreneurship

Source: Bygrave, W.D. / Zacharakis, A., The Portable MBA in Entrepreneurship, p.143

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What Is a Business Plan?

• Definition: The business plan is a written document prepared by the entrepreneur that describes all the relevant external and internal elements involved in starting a new venture. (Hisrich / Peters / Shepherd, Entrepreneurship, p.189)

• Integration of functional plans (e.g. Marketing, finance, manufacturing, HR)

• Planning horizon: 3-5 years

• „Like a road map“ when travelling from A to B on different possible routes

• Types of Business Plans

• „Business plans, like entrepreneurs, come in all shapes and sizes“ (Harper, Extraordinary Entrepreneurship, p.182)

• Summarized business plan: around 15 pages, contains only key information, not for external communication / communication to potential / new business partners

• Complete business plan: Most frequent form, 30-50 pages + 10-30 pages attachments, especially needed for obtaining external funding

• Operational business plan: More than 100 pages, mainly for already existing companies (example: sale of business), extensive quantitative part, used for internal planning process

• (Translated from Fischl / Wagner, Der perfekte Businessplan, pp. 17-20)


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Structure of a Business Plan – Example, page 1


Source: Hisrich / Peters / Shepherd, Entrepreneurship, p.201

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Structure of a Business Plan – Example, page 2


Source: Hisrich / Peters / Shepherd, Entrepreneurship, p.201

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Why Preparing a Business Plan?

• Even without the need for an external investor, entrepreneurs should force themselves to carefully prepare a business plan

• „In preparing for battle I have always found that plans are useless, but planning is indispensable.“ (Dwight D. Eisenhower)

• Helps you learning about details of your business, your market and your operations

• Supports gaining critical insights into your intended partner‘s styles, strenghts, weaknesses, and ways of cooperation

• Gives you intimate knowledge of the opportunity, buyer and user, market and competition, and financial characteristics

• Serves as tool for communication to outside parties interested in the venture, and as a medium for discussion with them, revealing their knowledge, creativity, and suit for their intended roles

• Prevents you from jumping ahead prematurely, limits sloppiness with regard to necessary research, creative problems solving, and „hard thinking“

• Tests your commitment and prevent your heart from getting too far ahead of your head

• Saves time during operations, helps avoiding common mistakes, helps creating order for a, in general, chaotic and unpredictable event

• Helps you creating the best possible roadmap from where you are, to where you want to be

• (Adopted from Timmons / Spinelli, New Venture Creation, pp. 270-271)


BIC ANGEL INVESTMENTS Dr. Joachim Behrendt

Phone: +90 212 328 1939 Fax: +90 212 328 1933

www.bicangels.com http:/twitter.com/joachimbehrendt http://tr.linkedin.com/pub/joachim-behrendt/18/706/a7a

Email: [email protected]

http://twitter.com/joachimbehrendt

http://tr.linkedin.com/pub/joachim-behrendt/18/706/a7a

