Where are we going today?Solve a painCreate a conceptTest the concept

Customer (Do we have one?)Benefits (Do our customers need it?)Distribution (Are we servicing our customers right?)Profit Potential (Can we make money?)

Do we have liftoff???

Welcome To FeasibilityWelcome To Feasibility

Where Are We Going?Where Are We Going?

The feasibility funnelTest, test and retestOutside the building testing (primary research)Inside the building testing (secondary research)

Looking for a “go” or “no go”The 2 Key Words Here:

ScalableRepeatable

We are right here

The Entrepreneurial ModelThe Entrepreneurial Model

Pain SolutionBenefits Customer

Distribution

Revenue Model

$Insert Your Name Here

System of Benefits

Let’s Make A Working ConceptLet’s Make A Working Concept

Pain SolutionBenefits Customer

Distribution

Revenue Model

$Insert Your Name Here

System of Benefits

Let’s Test Our Concept!Let’s Test Our Concept!

Who’s Got a Good Pain?Who’s Got a Good Pain?

The BenefitsThe Benefits

Let’s Test Our Benefits

How do we start? Features vs. Benefits Product – describes what it is Feature (attribute) – a factual statement about the product or

service Benefits – what it does for you (feature ‘proves’)

What is this? What are the features? What is the primary benefit? What is the deep driving benefit?

Benefit testing seeks to answer: How can we make our customer’s lives better?

Good Benefits:

1. Solve a problem2. Peak interest3. Evoke emotion

Let’s Make a Brochure/Website

Website Walkthrough: www.forwardline.com Why do we do this exercise before we have a business?

Fast, cheap and flexible Conveys your benefits and distribution Call to action Defines your competitive strategy Defines the playing field- Play on your turf Something you can test

Guerilla marketing Brochure/website gives you something in hand when pounding

the pavement

What Are Our Benefits?What Are Our Benefits?

The CustomerThe Customer

Multiple ChallengesMultiple Challenges Define who is customer (vs. market)Define who is customer (vs. market)

Segments- Primary and SecondarySegments- Primary and Secondary Do our benefits match our customer?Do our benefits match our customer? Compliment vs. contractCompliment vs. contract Explain what are you seeking to doExplain what are you seeking to do How much can/will the customer spend?How much can/will the customer spend?

““Thou shalt not bullshit thyself.”Thou shalt not bullshit thyself.”

How Do We Test the Customer?How Do We Test the Customer?

End GoalEnd Goal

Establish a buy decision for our concept:Customers in hand

Ideas for LeadsIdeas for Leads

People:People: FamilyFamily Fellow classmatesFellow classmates Work colleaguesWork colleagues College friendsCollege friends ProfessorsProfessors

Reference MaterialsReference Materials Local Biz Publications- Los Angeles Business JournalLocal Biz Publications- Los Angeles Business Journal WSJ, NYT, Entrepreneur, Fortune, Forbes, etc.WSJ, NYT, Entrepreneur, Fortune, Forbes, etc. Internet services: Facebook, Linked In Internet services: Facebook, Linked In

Let’s Establish Our Primary & Let’s Establish Our Primary & Secondary CustomersSecondary Customers

Questions So Far?Questions So Far?

Short BreakShort Break

DistributionDistribution

Let’s Test Distribution!Let’s Test Distribution!

How do we reach and service our customers?How do we reach and service our customers?

How Do We Reach Our Customers?How Do We Reach Our Customers?

What’s the difference between distribution and What’s the difference between distribution and marketing? marketing?

Direct distributionDirect distribution Indirect DistributionIndirect Distribution

Direct DistributionDirect Distribution

Examples of direct distribution:Examples of direct distribution:

Website and online salesWebsite and online sales Catalogue Catalogue Internal sales staff/sales repsInternal sales staff/sales reps Important note: Important note: All sales require peopleAll sales require people

Indirect DistributionIndirect Distribution

Examples of Indirect Distribution:Examples of Indirect Distribution:

Trade ShowsTrade Shows RetailRetail 33rdrd party distributors/Fulfillment Houses party distributors/Fulfillment Houses Independent sales repsIndependent sales reps

THE BATTLE IS WON OR LOST ON DISTRIBUTION

Distribution Successes

What Distribution Strategy Will We What Distribution Strategy Will We Use?Use?

Revenue ModelRevenue Model

Let’s Test Our Revenue ModelLet’s Test Our Revenue Model

Seek to answer:Can we make money?

Is it a worthy pursuit?What are our costs?How much do we need to get started?

What’s a Revenue Model?What’s a Revenue Model?

Lots of different ways to generate revenue:Lots of different ways to generate revenue:AdvertisingAdvertisingPay per click/keywordPay per click/keywordFranchising Franchising LicensingLicensingRetail or E*tailRetail or E*tailGood old fashioned salesGood old fashioned sales

Let’s Test Our Revenue ModelLet’s Test Our Revenue Model

Start With a Virtual TourStart With a Virtual TourAssess start-up and working capital needsAssess start-up and working capital needsTriangulate sales estimatesTriangulate sales estimatesDetermine Entrepreneur’s BetDetermine Entrepreneur’s Bet

A Word on Financial ProjectionsA Word on Financial Projections

““Easiest” thing to predict?Easiest” thing to predict?CostsCosts

Toughest to predict?Toughest to predict?SalesSales

P & L vs. Cash FlowP & L vs. Cash Flow

Key TermsKey Terms

Start-Up CostsStart-Up Costs

Cash Flow PositiveCash Flow PositiveBreakevenBreakeven

ProfitabilityProfitability

Entrepreneurs Bet (Cash Needs)Entrepreneurs Bet (Cash Needs)

Big Bad Sully’s Lemonade Stand

Price and Margin

Big Bad Sully’s Lemonade Big Bad Sully’s Lemonade StandStand

Ingredients to do Business:Ingredients to do Business:

4 Lemons/ $1

Sugar $3/LB

Cups $.10/ea Table $200

Website $100+ $25/Mo

Park Vendor Fee $100/Mo1 Mixer/1 Sales /1 Manager

$10/hourBanners $30/Mo

Cash Register $100

CostsCostsStart-Up Costs?Variable (direct) costs?

Fixed (indirect) Costs?

Identify the:

Lemonade Stand Lemonade Stand PremisesPremises

Stand is open 5 hours/ day Only open on weekends (8 Days/Month) Profits go to YMCA Youth Athletics We can sell 50 glasses per day (~5 gal.)

Based on prior sales efforts A gallon of lemonade requires:

4 lemons ($1) ½ pound sugar ($1.50) Water is nominal cost- Free How much is the cost for raw materials per

gallon?

Cost to Produce Sully’s Cost to Produce Sully’s LemonadeLemonade

Cost to Produce Raw Materials: $2.50/gallon

10 cups in each gallon So= $.25 per glass

(10%) Labor

1 Kid at $10/hour can make 1 gallon per hour

So, labor is $1 per glass Total cost to produce one

cup= $1.25

Cost to Distribute Each cup is $.10

Total Cost/Glass= $1.35

Pricing Sully’s Pricing Sully’s LemonadeLemonade

Competition: Grocers $1.00/12 oz can Vending Machines $2.00 Gas Stations $2.00 Other Kids Stands $1-$5

Market Value: Passersby have paid

anywhere between $1-$5 from children’s stands (prior experience)

Emotional element of buying from toddlers

Price for Big Bad Sully’s Lemonade:$4.00

Price and MarginPrice and Margin Retail Price= $4.00 Cost= $1.35 Gross Profit Margin= $2.65 or 66.25% Is this good? Will it cover overhead?

Is this Financially Is this Financially Feasible?Feasible?

Is this Financially Is this Financially Feasible?Feasible?

MONTH 1 2 3 4 5 6 7 8 9 10 11 12 Total

Sales Forecast

Total Sales Forecast 1,600.0 1,600.0 1,600.0 1,600.0 1,600.0 1,600.0 1,600.0 1,600.0 1,600.0 1,600.0 1,600.0 1,600.0 19,200.0

Variable CostMaterial Costs (160.0) (160.0) (160.0) (160.0) (160.0) (160.0) (160.0) (160.0) (160.0) (160.0) (160.0) (160.0) (1,920.0)

Salaries (Mixer) (400.0) (400.0) (400.0) (400.0) (400.0) (400.0) (400.0) (400.0) (400.0) (400.0) (400.0) (400.0) (4,800.0)

Total Variable Cost (560.0) (560.0) (560.0) (560.0) (560.0) (560.0) (560.0) (560.0) (560.0) (560.0) (560.0) (560.0) (6,720.0)

Gross Profit 1,040.0 1,040.0 1,040.0 1,040.0 1,040.0 1,040.0 1,040.0 1,040.0 1,040.0 1,040.0 1,040.0 1,040.0 12,480.0

Fixed Expenses

Salaries - Manager (400.0) (400.0) (400.0) (400.0) (400.0) (400.0) (400.0) (400.0) (400.0) (400.0) (400.0) (400.0) (4,800.0)

Salary (Salesman) (400.0) (400.0) (400.0) (400.0) (400.0) (400.0) (400.0) (400.0) (400.0) (400.0) (400.0) (400.0) (4,800.0)

Website Maintainance (25.0) (25.0) (25.0) (25.0) (25.0) (25.0) (25.0) (25.0) (25.0) (25.0) (25.0) (25.0) (300.0)

Vendor Fee (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) (1,200.0)

Banners (30.0) (30.0) (30.0) (30.0) (30.0) (30.0) (30.0) (30.0) (30.0) (30.0) (30.0) (30.0) (360.0)

Total Fixed Expenses (955.0) (955.0) (955.0) (955.0) (955.0) (955.0) (955.0) (955.0) (955.0) (955.0) (955.0) (955.0) (11,460.0)

Total Cost (1,515.0) (1,515.0) (1,515.0) (1,515.0) (1,515.0) (1,515.0) (1,515.0) (1,515.0) (1,515.0) (1,515.0) (1,515.0) (1,515.0) (18,180.0)

Net Profit or (Loss) 85.0 85.0 85.0 85.0 85.0 85.0 85.0 85.0 85.0 85.0 85.0 85.0 1,020.0

Cumulative P&L                          

Start Up Costs Web Design (100.0)

Table (200.0)

Cash Register (100.0)

(400.0)

Things to Consider on Pro FormasThings to Consider on Pro Formas

Premises vs. AssumptionsPremises vs. AssumptionsAccuracy of costsAccuracy of costsPricingPricing

How do we triangulate price? How do we triangulate price? The 3 C’s- Cost, Customer & Competition The 3 C’s- Cost, Customer & Competition

Are we violating the golden rule of Are we violating the golden rule of entrepreneurship?entrepreneurship?

What Is Our Revenue Model?What Is Our Revenue Model?

Feasibility ScorecardFeasibility Scorecard

5 Take-Aways5 Take-Aways

1)1) Entrepreneur Model (Concept)Entrepreneur Model (Concept)a)a) Is it scalable and repeatable?Is it scalable and repeatable?

2)2) Customer(s) In HandCustomer(s) In Hand3)3) No New Ideas, Just Better ExecutionNo New Ideas, Just Better Execution4)4) Test, test and re-test (The Funnel)Test, test and re-test (The Funnel)5)5) The 3 keys to successful business:The 3 keys to successful business:

a)a) Treat your customers like goldTreat your customers like goldb)b) Treat and train your employees with respect and careTreat and train your employees with respect and carec)c) Balance your checkbookBalance your checkbook

HomeworkHomework

Come in tomorrow with a concept to execute

Questions?Questions?