Start-up Planning Pathways: Where Should You Start? PDF

to validate opportunities, it is important to identify a target audience, a humanised representation [persona] of someone who feels the problem you have identified Start-up planning pathways: where should you start? most people start with the business plan!...

to validate opportunities, it is important to identify a target audience, a humanised representation [persona] of someone who feels the problem you have identified Start-up planning pathways: where should you start? most people start with the business plan! A business plan is a comprehensive document that outlines a company's goals, strategies, financial projections, and operational details. It serves as a roadmap for the business and is often used to secure funding from investors or lenders. Are business plans effective? many entrepreneurs tend to start by writing a detailed business plan but we have mixed evidence about watery this a good idea pros and cons a business plan scripts the ‘markets to be served, proposed products/services,required resources and the anticipated growth and profitability of the new venture’ answers these questions: ‘where is the business concept now?’, where does it want to get to? and how is it going to get there? profiles the opportunity, details the start-up team/individuals The goods of writing it: tells you if your business opportunity is desirable and feasible helps select, evaluate, and fine-tune start-up activities anticipates and avoids demand and supply issues such as supply bottlenecks gives confidence, improves control perceptions and promotes task persistence and goal commitment a ;reality check’ that helps avoid in built cognitive biases gives credibility and eases access to external finance The bads of business plan: starting up is often a non linear journey with lots of iterations Foundations and Forms of Entrepreneurship 13  early-stage ventures [especially premarket] face a great deal of uncertainty → content of business plan is just an idea until entrepreneurs actually do start up creating a detailed business plan right away might lead to overlook false market assumptions better to focus initial activities on collecting customer information and defining the market opportunity Is it effective the evidence we do have suggests that business planning seems to pay off more for small firms that are not very new and that might not be a good idea for new ventures to start off by creating a detailed business plan an alternative approach is to start by drafting several iterations of a business model canvas and then create a business plan Business Models a business model describes the building blocks of an organisations that are necessary for it to make or raise money the business model canvas is a tool that allows people to communicate the value generated by a business and the means through which that value is generated without having to exchange 90- page plans you might be tempted to think to the business model only in terms of revenue model[SaaS] but the business model is not just monetisation, its a holistic representation of the business The context provides a distinction between making money and raising money for a new venture: Making money: This sustains the business. It refers to generating revenue through the company's operations and selling products or services. Raising money: This is different from making money. It typically involves obtaining funds from external sources like investors, loans, or grants to support the business, especially in its early stages. Making money is crucial for long-term sustainability, while raising money can provide the initial capital needed to start and grow the business before it becomes self-sustaining. BM based on Market Geometrty based on the number of actors in the market Foundations and Forms of Entrepreneurship 14  Direct [1 side] includes products, services, events, B2B and B2C sales Multi-sided [Airbnb, 2 or more sides] Includes platforms that provide a place for meeting and exchange between supply and demand (e.g., Airbnb, Uber, Ebay, Zalando, etc); some of these platforms also sell the data they collect to other actors (e.g., Patientslikeme) Key components of BM you offer [product or service] → value proposition or the WHAT your target clients → the WHO the set of internal and external activities that allow you to deliver your offer to the customer → the HOW how do you make money out of it? who will pay? What is the purpose of a Business Model The Classic BMC Template A Business Model Canvas (BMC) is a strategic management tool used to visualize and develop business models. It was created by Alexander Osterwalder and Yves Pigneur and has become widely adopted in the business world. The BMC provides a simple, one-page overview of a business idea or concept, breaking it down into nine key components: Foundations and Forms of Entrepreneurship 15  1. Customer Segments: Who are your target customers? 2. Value Propositions: What unique value do you offer to your customers? 3. Channels: How do you reach and communicate with your customers? 4. Customer Relationships: What type of relationship do you establish with your customers? 5. Revenue Streams: How does your business generate income? 6. Key Resources: What assets are essential to your business model? 7. Key Activities: What are the most important activities your business must perform? 8. Key Partnerships: Who are your key partners and suppliers? 9. Cost Structure: What are the main costs involved in your business model? The BMC helps entrepreneurs and business leaders to quickly and easily define and communicate a business idea or concept. It's particularly useful for startups and new projects, as it allows for rapid iteration and refinement of business models. Foundations and Forms of Entrepreneurship 16  feasibility - how do i make it actually possible viability - how do i make it financially viable desirability - how do i make it wanted The Lean Business model canvas — builds on the assumption that entrepreneurs are problem solvers and that there is no entrepreneurial opportunity without customer demand The Lean Business Model Canvas is a simplified version of the traditional Business Model Canvas, designed specifically for startups and new projects. It focuses on addressing problems, solutions, key metrics, and competitive advantages. The Lean Canvas helps entrepreneurs to: Quickly outline their business idea Identify and prioritize risks Recognize the most important elements of their business Iterate and pivot their concept efficiently Foundations and Forms of Entrepreneurship 17  Key differences from the traditional canvas include: Emphasis on defining the problem and solution Focus on key metrics for measuring success Inclusion of the "Unfair Advantage" or competitive edge Replacement of key activities and resources with "Key Metrics" This lean approach is particularly useful for startups operating in uncertain environments, allowing for rapid testing and adaptation of business hypotheses. problem → customer segments → unique value proposition → solution → channels → revenue streams → cost structure → competitive advantage → key metrics Here's an explanation of each block in the Lean Business Model Canvas, along with examples: 1. Problem This block describes the top 1-3 problems that your target customers are facing. Example: For a food delivery app, the problems might be: Limited food options in certain areas Long wait times for food delivery Foundations and Forms of Entrepreneurship 18  Inconvenience of picking up takeout 2. Customer Segments This defines your target audience or users. Example: For the food delivery app: Urban professionals aged 25-40 College students Busy families 3. Unique Value Proposition This is a clear, compelling message that states why you are different and worth paying attention to. Example: "Hot, restaurant-quality meals delivered to your door in 30 minutes or less." unique selling points saves people time, money, energy or space reduces people worries and limiting risks increases people satisfaction levels brings people convenience improves people status or image makes it easier to earn more money 4. Solution This outlines the top features of your product or service that will solve the customer's problems. Example: Wide network of restaurant partners Efficient routing algorithm for quick deliveries User-friendly mobile app interface 5. Channels Foundations and Forms of Entrepreneurship 19  This describes how you will reach your customers and deliver your value proposition. Example: Mobile app (iOS and Android) Website Social media marketing 6. Revenue Streams This explains how the company will make money. Example: Commission from restaurant partners Delivery fees from customers Premium subscription for free delivery 7. Cost Structure This lists the main costs involved in running the business. — all the costs incurred to operate a business model [start-up + variable + fixed] Example: App development and maintenance Marketing expenses Customer support staff Payments to delivery drivers 8. Key Metrics These are the key numbers that tell you how your business is doing. Example: Number of daily active users Average delivery time Customer retention rate Foundations and Forms of Entrepreneurship 20  9. Competitive Advantage This is something that cannot be easily copied or bought by competitors. — what is going otmake your business stand out from the crowd Example: "Proprietary AI-driven routing algorithm that optimizes delivery times and costs." Revenue Model — how the start-up gets paid How are you going to make money with this?? Direct sales: Selling products or services directly to customers. Bait and hook: This model involves offering a basic product at a low cost or for free, then charging for refills or associated products. Foundations and Forms of Entrepreneurship 21  Freemium: Offering a basic service or product for free, but charging for premium add-ons or advanced features. Fining: Charging a surcharge or penalty fee under certain conditions. Subscription: Customers pay a recurring fee (e.g., monthly or annually) for continued access to a product or service. Brokerage: Earning a commission by facilitating transactions between parties. Advertising: Generating revenue by displaying ads to users, often in free-to-use products or services. Affiliates: Earning commissions by promoting other companies' products or services. Peer-to-peer: Facilitating transactions directly between individuals, often taking a small fee or percentage. Each of these models has its own advantages and is suitable for different types of businesses and industries. The choice of revenue model can significantly impact a company's growth strategy and overall business model. BM assumptions like the other building blocks of your BM, your financials are also a collection of assumptions that need testing, examples: we can acquire customer for less than $XX each we will be able to upsell $XX of our free users to our premium plans average revenue per premium plan customer will be $X/month our operating cost will be less than $X per user/month we can keep customer abandonment rate below X% Start up Financials 2 key indicators for early-stage ventures: 1. cash burn rate a. one of the key problems for early-stage ventures is running out of cash b. it take time before a start up starts making money Foundations and Forms of Entrepreneurship 22  c. the cash burn rate is the amount of cash spend or used over specific time which can be determined through cash flow statement [cash spent/time period] 2. break-even point a. point at which the case balance is going to start being positive Cash Burn Rate Calculation Break-Even point Break-Even Point is the point at which total revenue equals total costs, resulting in neither profit nor loss. For a startup, it's a crucial milestone that indicates when the business begins to be profitable. Calculating the break-even point helps entrepreneurs understand: How many units they need to sell to cover all costs The minimum revenue required to avoid losses The time frame to achieve profitability This information is vital for financial planning, setting realistic goals, and demonstrating viability to potential investors. The formula for break-even point is typically: Break-Even Point = Fixed Costs / (Price per Unit - Variable Cost per Unit) Key value drivers in order to deliver a value proposition, a start up has to think about how to use: key resources - workers equipment Foundations and Forms of Entrepreneurship 23  key activities - productions key partners - those that a start-up needs to help. Trade-off at the heartof these operational issues: ownership = control, but can make it difficultto grow quickly; weak ties at the beginning stimulate idea sharing, strong ties later stimulate idea building (Mannucci & Perry-Smith, 2022) These value drivers (enabler of delivery of value proposition) have implications for start-up costs, cash burn rate, and break-even point Link between value driver and costs retail and food marta is ‘location, location’ so will incur some costs [constructions, getting supplies, etc] service-based like consultancy may have high staff costs manufacturers may need lots of equipment and space web and app-based businesses may need software engineers to design the website or app all need systems to inform, educate and sell to customers Lecture 5 — entrepreneurial teams and leadership Recap: the starting point to turn opportunities inot businesses is to figure out what is your business model → how do you create, deliver and appropriate value? business models change over time and there are different approaches to developing them however, your business model is a set of hypothesis [what you believe to be true] until test them using existing data or collecting new one Entrepreneurial teams formation strategies Myths about the Lone entrepreneur most startup have more than 1 founders one of the common problems CEOs and entrepreneurs face: how do i build and motivate my team? 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